November 21, 2008
China's soy and corn import volume is pushed up by the Chinese government purchase of more of the two crops and local farmers turning to cheaper US soy imports.
In the bid to boost domestic soy and corn prices, the Chinese government is buying an additional 3 million tonnes of soy and 5 million tonnes of corn.
Traders said the RMB 3,700 (US$541.6) a tonne that the government was paying for soy, 20-percent above the cost of US imports, made farmers unwilling to accept a lower price from crushers, who were instead turning to foreign supplies.
US soy can be bought at around RMB 3,100 per tonne including freight, cheaper than domestic soy after the decline of the CBOT soy prices and collapse of freight rates. China is the largest soy importer in the world.
Beijing expects to buy 1.5 million to 3 million tonnes of soy on top of 1.5 million tonnes agreed to earlier, and to buy another 5 million tonnes of corn, doubling its existing plan to 10 million tonnes amid weak demand from corn processors and feed mills and a record corn harvest, the traders said.
However, the government has not confirmed it plans to buy more following its annoucement of 1.5 million tonnes of purchases last month, which has supported the CBOT soy prices in anticipation of more imports from the country.
A senior soy dealer with an international trading house in Singapore, said they do not expect to see a big impact on international prices.
The government's purchases have supported prices on the Dalian Commodity Exchange, with the front-month January soy contract rising by RMB 33 per tonne to close at RMB 3,590 on Thursday (November 20) after rising as much as 3 percent on Wednesday (November 19).
The government has been piling up on imports of soy and corn over the past months, aiming to have 5 million tonnes of soy in reserves by the end of the year.
Soy imports by China are expected to pick up in November and December to more than 3 million tonnes, respectively, up from 2.13 million tonnes in October.
US$1=RMB 6.835 (November 21, 2008)