October 18, 2010

China ups purchase price of domestic new soy

The central government will continue to buy soy from the new domestic harvest for state reserves at RMB3,800 (US$570) per tonne, 1.6% higher than last year's price, but 1% lower than local market prices, trading sources said Friday (Oct 15).

The government was unlikely to offer any subsidies to crushers in the northeast this year as it did last year, because rising Chicago Board of Trade soy prices had made domestic prices attractive, said another trading manager with a major local crusher.

However, the price would not attract farmers to sell to state reserves, according to industry officials.

"Market prices right now are higher than this, so farmers are more willing to sell to (local) crushers or trading houses", said Wang Xiaoyu with Heilongjiang Soybean Association.

Despite lower domestic soy prices, analysts said they did not expect crushers in coastal areas, which are the major importers and process mainly imported soy, to shift to domestic crops.

"There is almost no impact on imports. Little of the domestic soy crop can be shipped out of the northeast after the harvest is used for food and by local crushers," said Huang Xiao, an analyst with Beijing Capital Futures Co Ltd. "We do not expect the price to have any impact on the market either. Market prices have already jumped above this level."

Soy imports rose 22.5% to a record 50.34 million tonnes in the 2009/2010 marketing year (Oct/Sept), according to official figures, while the domestic harvest this year would be about 14.8 million tonnes.

Good crushing margins over imported soy have prompted soy plants to actively book soy from the US and South America for 2011.