China seen to continue gobble up world soy supplies next year

 

 

China is expected to keep importing huge shipments of soy next year, and volumes may even exceed this year's record, as soymeal demand increases and amid Beijing's attempts to shore up local prices.

 

China's National Grain and Oils Information Centre estimated that soy imports in the marketing year ending September 2010 would fall to 38.5 million tonnes, six-percent lower than the record 41.1 million over the previous year.

 

The 41.1 million figure was exceptional as the government was amassing its own reserves of imported soy, which is not expected to happen this year because reserves are plentiful.

 

But traders expected imports next year would be higher than 41 million tonnes, partly driven by better demand.

 

China's feed production has recovered since the second half of the year due to steady growth in its pig population and Beijing's stimulus spending, which has spurred meat consumption and created jobs for millions of immigrant farmers.

 

Production at major feed mills is up more than 10 percent over the fourth quarter of last year, after China's overall feed production fell percent percent in the first three quarters of 2009. The growth was reflected in rising demand for pig and poultry feed, said Sun Zhiqiang, an official with the China Feed Industry Association.

 

Pig herd sizes have grown since June, rising by five percent to more than 469 million head by end-October, official figures show.

 

A lower domestic harvest of peanuts and cotton also saw soymeal's market share expand to fill the gap, traders said.

 

CNGOIC estimated China's soymeal demand to increase five percent to 34.7 million tonnes in 2009-10. Tight fishmeal supplies, constricted by falling imports, could also lead mills to blend in more soymeal.

 

China has already ordered 15.84 million tonnes of the new US soy harvest, nearly double of the 8.28 million booked by this point in 2008, according to USDA figures.

 

Traders estimated that the total may reach 18.36 million tonnes, assuming that 70 percent of 3.6 million tonnes going to unknown destinations was also China's purchases.

 

China's soy imports are accelerating rapidly and there will be large inflow of US soy in coming months, said Liang Yong, an analyst with China Galaxy Futures Co. Ltd.

 

Strong soy purchases by China have driven up CBOT prices to a 2-A½ month high on Thursday (Nov 19), and China's demand helped lift US soy export sales last week to their highest in seven weeks.

 

China tried to limit this year's surge of imports by encouraging crushing plants in the country's northeast to use local soy rather than imports through the use of subsidies. Trading sources said the subsidies offer will be extended for the new harvest.

 

But the offer is not expected to affect US soy imports because buyers have nearly completed their purchases and prices for later months of South American cargoes are much lower, said a trader.

 

Chinese buyers have booked more than six million tonnes of South American soy. They were looking for US supplies for January and February shipment and many could shift to the cheaper South American crop for shipments after March.

 

Still, the subsidies may work if the persistent dry weather in South America drives up CBOT prices, and the price gap between imports and domestic soy this year is not as big as last year, said crusher officials.

 

Traders and analysts expect China's imports to rise by 3.5 million to four million each month from November to February.

 

Bad weather this year have led to speculation that China may harvest a smaller soy crop that has a lower quality, and its use for crushing into soymeal and soyoil will be limited only to crushers in inland areas in the northeast.