Having performed below expectations, the next few weeks may see some large Chinese soy purchases. The logic for this is very simple. For the better part of the last 10 or 15 years, China's soy harvest has come in at 13 to 16 million tonnes. With corn and rice both offering higher investment returns, the USDA and the China National Grains and Oil Information Centre (CNGOIC) have pegged this year's domestic harvest at 12.6 million and 12.8 million tonnes respectively.

 

These estimates have lately been subject to considerable doubt, with some analysts expecting China's soy crop to come in somewhere between 9 million and 10 million tonnes. The USDA's Beijing bureau recently reported that soy planted area had fallen more than expected, with, "a significant drop in planted area in Heilongjiang", China's largest soy growing province.

 

The USDA's assessment of less planted area than expected is compounded by this year's disappointing soy crop yields. According to China's official Xinhua news agency, farm ministry officials stated that soy crop yields had fallen 11%, from 2011's 1.9tonnes/acre to 1.69/tonnes this  year. Even without less land planted with soy, the lower crop  yield would result in a soy crop some 1.39 million tonnes below USDA estimates, or 11.2 million tonnes.

 

With much less land planted with soy than was expected, the Xinhua report cited a farm ministry official expecting a 2012 soy harvest amounting to 9.8 million tonnes. As China's official projections typically overestimate feed crop sizes, that could imply a soy harvest of 9.5 million tonnes or less.

 

A gap of 5 million tonnes between how much soy China typically grows and this year's crop could, in theory, boost expected 2012-13 soy imports from the USDA-projected 61 million tonnes to 66 million tonnes. But this may or may not happen.

 

On one hand, on top of its old year purchases, as of early November, China had already ordered 11 million tonnes of soy imports during our current 2012-13 marketing year. This means that despite China's sparse soy harvest, it could opt to wait until cheaper South American soy becomes available in Q2 2013.

 

But Argentine soy plantings are running 1.75 million acres behind last year's pace. After last year's drought, this year flooding has resulted in just 3.6% of the expected 19.3 million acres of land expected to be sown with soy being planted -and it is getting late into the southern hemisphere growing season.

 

Whether in soy, corn or fishmeal, China has a notorious record of buying feed imports at their market bottoms, the most recent example being its massive Q1 imports of fishmeal, just before its price took off. China will be closely watching Latin America's weather -and you should be closely watching China. If it suddenly starts importing a large amount of soy and Latin America's weather is not co-operating, you can consider that an oilseed market bottom.