October 28, 2003

 

China's Soybean Demand Remains Bullish Despite Rising Prices

 

 

China is expected to buy more soybeans despite Chicago futures scaling six-year peaks and Dalian contracts sweeping new highs, traders said on Monday.

 

The first cargo had arrived after September 20 under extended interim measures to let in genetically modified food imports, and traders expected China to swiftly unload the cargo to keep prices from rising further.

 

Talk also circulated that China might release more soybeans from state reserves after selling 800,000 tons earlier this year, but traders questioned whether that would reduce prices as stocks remained low.

 

"The prices are going crazy. Basically people are still bullish about China's soybean demand," said a dealer with a global trading firm in Shanghai.

 

Chicago Board of Trade (CBOT) soybeans hit six-year highs in Asia, with the November contract <SX3> rising to $7.77 a bushel after hitting $7.80, the highest since September 1997.

 

China's Dalian soybean futures <0#DSA:> rose steeply, with the key May contract <DSAK4> ending up by the 3% limit at 3,428 yuan ($414.2).

 

RISING PREMIUMS

 

"Prospects for more Chinese buying boosted the CBOT and Dalian markets. They might continue to rise," said a second trader with a foreign trading firm in Beijing.

 

Traders said Chinese crushers were still able to buy, but premiums had jumped to 210 U.S. cents a ton C&F China, from around 190 cents last week.

 

In the past few days, China might have bought another three cargoes of U.S. soy for December and January shipments at 195 U.S. cents C&F China over the CBOT January contract, on top of some 15 cargoes booked since early this month, traders said.

 

"They kept buying and buying," said a third trader from a global trading firm in Shanghai. "Soybean prices are high, but crushers are still able to eke out profits based on the high prices of soyoil and soy meal."

 

Traders said the first one or two cargoes had arrived in China after September 20 and they did not see the quarantine bureau dragging its feet over unloading.

 

One said China had also ordered about 15 cargoes of South American soybeans for April, May and June shipments at around 60-70 U.S. cents over distant Chicago contracts.

 

"The government would want to do something about these high prices. For one, the quarantine can loosen its grip on the discharge of cargoes," said the third trader.

 

"We heard that the government might also release more soy stocks, but frankly, there isn't much left. Even if they release, say, 200,000 tons, the impact will be negligible because China's annual demand is in the millions," he said.

 

($1=8.276 Yuan)