October 25, 2010

 

Firm Chinese soy demand will bolster world prices

China's voracious appetite for soy amid rising meat consumption and higher crushing margins will likely remain strong and support global prices, both near- and medium-term, traders and analysts said.

 

China is the world's largest importer of soy, with imports jumping to 50 million tonnes in the year to September 2010, from 41 million tonnes in 2008-09. Imports this year are projected at 54 million tonnes.

 

The country consumes close to 50 million tonnes of pork annually, around half of the world's production.

 

Apart from poultry, chicken and dairy products, it also consumes millions of tonnes of geese and ducks. After oil is extracted from beans, the soymeal is used as animal feed.

 

This year China has been buying soy a few weeks earlier than its usual schedule as processors are taking advantage of the high crushing margins, analysts said.

 

Last week, crushers were earning profits of RMB470 (US$70)/tonne for processing imported soy and RMB490 (US$73)/tonne for domestic soy, according to an agribusiness report.

 

At the beginning of last week, soy stocks at major ports in China were estimated at six million tonnes, up 200,000 tonnes from a week earlier, the report said.

 

However, higher prices and ample stocks have not dampened China's buying. Apart from locking in supply from the ongoing US harvest, the country is also purchasing the Latin American crop, which will be harvested only by the end of February.

 

Based on the current schedule of shipments and deals transacted by crushers and trading companies, soy imports in this quarter could rise to 17 million tonnes, an oilseeds analyst said.

 

Several traders said they expect China's soy imports to be above 16 million tonnes this quarter compared with 14 million tonnes during the July-September period.

 

China has almost fully covered its requirements for October-December shipments and also purchased more than 15% of its requirements for the January-March period, traders said.

 

Chinese demand has been primarily responsible for rising prices on the Chicago Board of Trade and the November futures contract has the potential to test US$12.40 a bushel in the next few weeks, experts said.