October 19, 2009

Chinese companies are likely to maintain their strong procurement interest in South American soy for shipment after next April, although some crushers in the north may switch to domestic crops, according to an official survey by the China National Grain and Oils Information Centre (CNGOIC).

The centre said domestic soy harvests are available from October onwards and some crushers in the north would focus their purchases on domestic crops and reduce their demand for imports.

However, the demand for imports are likely to increase in the coming weeks as the Chinese government's soy reserves remained expensive while soy from Brazil and Argentina for April-to-June shipment were still cheaper.

The soyoil market rose after the week-long National Day holidays and a lower inventory coupled with cooler weather would further increase the demand for soyoil.

Meanwhile, the soymeal market turned bullish with rising prices. The centre said soymeal prices are likely to be kept at a high level as demand from feed mills have picked up while October soy imports are likely to stay low.

On the other hand, the corn market was weakened after worries were alleviated about weather damage to the crop and the resultant fall in corn output. The centre has estimated output to fall 2.5 million tonnes to 163 million tonnes this year.

Beijing's stockpiling of the new corn harvest could support prices in the northeast, although prices have fallen significantly in the northern areas due to more supplies from the harvest. Recent sales of the government corn reserves at weekly auctions have also dropped to the lowest amount since July.

The wheat market was also weakened due to a fall in sales of flour after the National Day holidays. Meanwhile, China's decision to raise the minimum purchase prices of wheat will encourage sales of old crops at the government weekly auctions.