November 15, 2012

 

 

China's soy crushing firms are severely affected by recent fluctuations in international soy prices.

 

Chinese crushers started to stockpile soy when the USDA forecast in September that the country will see its smallest soy harvest in nine years as the world's largest soy exporter was hit by the most severe droughts in about 50 years in the summer.

 

Investors have since bet on the upward trend, pushing soy prices to a record high before its recent dip as the impact of the drought turned out to be less severe than the previous estimates.

 

In its monthly report, the USDA raised its estimate for US soy production and increased its forecast for global inventories.

 

Affected by the news, soy futures prices have headed south on the Chicago Board of Trade.

 

The price of soy contracts on the board had nosedived around 20% from its high in September.

 

The slumping prices significantly squeezed profits of Chinese crushers who had stored the product at higher costs earlier for fear of further price gains.

 

Wang Xiaoyu, deputy secretary general of the Heilongjiang Soybean Association, told reporters that in the current context, crushing one tonne of soy oil would incur losses for Chinese companies.

 

He estimated that 90% of the companies have halted production since the third quarter.

 

"Crushers that rely on overseas supply are likely to post losses this year," Zhang Lanlan, an analyst with industry service provider, intl.sci99.com, added.

 

China imports around 80% of its total soy consumption, as foreign soy are much cheaper.

 

Statistics released on November 10 from China's customs showed that China imported 48.34 million tonnes of soybean in the first 10 months of 2012, up 16.6% on-year.

 

Chinese producers imported 497 tonnes and 403 tonnes of soy in September and October, respectively, when the prices were high, data showed.