October 29, 2009

China's port soy stocks have dropped by as much as half in the past three months to 2-3 million tonnes, as imports slowed and crushers avoided expensive government reserves ahead of the new harvest.

 

The tight supply situation in China, the world's largest soy purchaser, mean imports could bounce back above four million tonnes a month by the end of the year while some Chinese crushers may have to shut down next month if there are delays in US shipments, traders said.

 

Despite the availability of the new harvest, high prices and low quality are expected to put many buyers off, with some traders estimating arrivals of four million tonnes or more in December, nearing the June record of 4.7 million tonnes.

 

Some Chinese crushers said harvest delays in the US, the world's top soy exporter, could disrupt the loading schedule for shipments due to arrive in the last two weeks of November.

 

China's soy imports in September fell to the lowest level in 11 months at 2.75 million tonnes and imports are expected to be low again in October as tight supplies in South America had pushed up prices.

 

Prices of imported soy offered at ports had risen by five percent since last week to RMB3,900 (US$571) per tonne.

 

Liang Yong, an analyst at Galaxy Futures Co Ltd, said ports' inventories had fallen below three million tonnes, lower than the average level of 3.4-3.5 million tonnes in the past two to three months.

 

Meanwhile, stocks could already be as low as two million tonnes, according to an industry website (www.chinafeedonline.com).

 

Gao Chunlai, an analyst with the website, said many crushers will have used up their stocks by the end of this month and they will have to shut down if shipments are further delayed until mid-November.

 

Beijing has agreed to offer subsidies on sales of 1.95 million tonnes of soy reserves to some crushers in the northeastern provinces. However, the response from crushers was poor as only 106,100 tonnes of state soy reserves have been sold since July.

 

One major crusher has shown its interest in the subsidised state reserves following its cancellation of two US cargoes last week in order to take advantage of the state-backed sales, traders said.

 

The subsidies will lower prices of soy from the state reserves to RMB3,540 per tonne, which has attracted crushers particularly in inland Heilongjiang province, which were allocated 1.5 million tonnes.

 

On the other hand, farmers in the northeast were still unwilling to sell their new harvests at lower than last year's RMB3,700 per tonne after Beijing agreed to continue stockpiling the new crop.

 

Meanwhile, bad weather has reduced the output and quality with the harvest containing a large proportion of immature green beans, according to traders.

 

Coupled with expectations that the Chinese government's price in the northeast will be higher than import prices, the country could see a repeat of last year's record volume of imports.

           

US$1=RMB6.830 (Oct 29)