October 23, 2012

China's soy supplies affected by declining output

As China's soy farmland is in continual decline over the past few years, the expected slump of local soy production for 2012 may affect supplies due to strong demand from processing mills.

The state-backed think-tank China National Grain and Oils Information Centre earlier predicted China would import a record high of 57.5 million tonnes of soy in the full year of 2012, up 9.3% from last year.

The imports in the fourth quarter were expected to be higher than expected as the recent sharp fall of the US soy futures prices would probably trigger bargain buying, the CNGOIC said.

The think-tank also estimated that the country's soy output this year would fall 11.63% from last year to 12.8 million tonnes.

In contrast to the sharp decline in output, the Ministry of Agriculture forecast that the country's soy consumption would gain 3% on year to 74.39 million tonnes in 2012.

Cngrain, a leading domestic grain information provider, predicted that China's soy planting area and output would continue to slide in the next year.

Despite the recent fall of soy futures prices, tight supply will prop up the soy market to extend the bull-run over the rest of this year, analysts believe. Soy prices are likely to display a "V" shape running in the fourth quarter, they add.

Currently, domestic soy oil prices are experiencing a steadily rising trend.

Meanwhile, soy futures traded on the Chicago Board of Trade have little reason to drop as the US soy crop harvesting is coming to a close and this has shrugged off the possibility that the country's soy output projection will be pushed up further.