October 29, 2010

Soy purchase eases China's reliance on foreign edible oil

China's soy imports smash records every year but if the country keeps up last week's pace of buying, its processors will have more than enough to crush into cooking oil, reducing imports of edible oil.

A weaker dollar has made bumper soy crops from the Americas cheaper than processed soyoil from Argentina as well as Malaysian and Indonesian palm oil.

More Chinese soy crushing will cut edible oil imports by 5-7%, to about 6.3 million to 6.4 million tonnes for the marketing year to September 2011, industry estimates show.

The scenario provides a bearish counterpoint to increasing US soyoil prices as South American biofuel mandates suck up more edible oil and Malaysian palm oil prices climb on low yields after this year's erratic weather.

"Export supplies for vegetable oils are not increasing from the Chinese point of view and they are depending more on soy imports to meet cooking oil demand," an analyst said.

China's soy buying in the new marketing year has taken on more urgency than ever, partly driven by a delayed Brazilian soy crop and concerns over growing food inflation after Lunar New Year holidays in February.

US sales data shows China snapped up 1.45 million tonnes of US soy last week, more than doubling its purchases from the week to October 15, and the highest so far for the US marketing year that started on September 1.

The additional demand prompted the China National Grain and Oils Information Centre (CNGOIC) to revise soy import estimates to 54 million tonnes in the new marketing year, or a jump of 7.2% from 2009-10.

"If soy stocks increase by about five million tonnes due to the buying, it means at least one million tonnes more soyoil," said a trader in Shanghai.