November 29, 2010

China soy prices consolidate near state purchasing price

Soy prices in China's major producing areas were mostly unchanged in the week to Friday (Nov 26), with the government's recommended purchasing price maintaining a floor but concerns remaining about its increasing efforts to contain inflation.

Soy prices in Jiamusi, in the major producing province of Heilongjiang, were around RMB3,760 (US$563) a tonne, flat from a week earlier.

Prices in Harbin, also in Heilongjiang, were around RMB3,800 (US$569)/tonne, also unchanged from last week.

Spot prices are normal and reasonable, with the government's recommended purchasing price of RMB3,800/tonne providing strong support, analysts said.

China imported 3.73 million tonnes of soy last month, up 48.1% from a year earlier. Soy imports in the January-October period rose 26% to 43.8 million tonnes.

Soy isn't a very attractive target for speculators in China because domestic production is stable and imports are increasing, experts said.

The near-term outlook for the futures market also isn't clear because of the government's tough measures against inflation, according to analysts. Various measures have been taken by government agencies and exchanges to tighten credit and damp speculative activity.

Over the long-term, the outlook is positive as US Federal Reserve's quantitative easing programme is expected to accelerate dollar depreciation and drought in South America may reduce global production, analysts said.