Northeast China's Heilongjiang province is preparing to start this year's soy stockpiling programme, as market prices of soy have already dropped below the protective price set by the government.
According to a survey by the Heilongjiang Soy Association, soy processing mills' purchase prices now stand at RMB3,840-3,960 (US$606-625)/tonne, down RMB160-240 (US$25-38)/tonne from late October and lower than the minimum purchase price of RMB4,000 (US$631)/tonne.
China has set the minimum purchase price for this year's new soy at RMB4,000 (US$631)/tonne. If market prices of new soy drop below that price in the period from November 23, 2011 to April 30, 2012, the state stockpiler China Grain Reserves Corporation will start to purchase for reserves.
Soy processing enterprises, weighed by poor crushing profit, have constantly cut purchase prices of soy. A crushing mill incurs loss of about RMB53 (US$8) for processing one tonne of domestic soy now.
Pressured by losses in production and difficulties in purchases, most cooking oil crushers in the province have suspended production. Meanwhile, cooking oil producing mills in coastal areas take advantage of cheaper import soy prices and exert pressure on the soy market in Heilongjiang which has already seen inflow of soyoil and soymeal from coastal areas.
Heilongjiang is China's biggest soy production base, yielding about 40% of the nation's total soy output.