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December 8, 2008

 

China extra soy purchase keeps prices high

 

 

China's soy market is expected to stay robust this week as extra state purchases are set to keep domestic soy prices well above those of imports, an official survey showed.

  

With the fall of Chicago Board of Trade soy prices, costs for imported soy stayed lower than domestic soy. Domestic prices were supported by Beijing's extra purchase of another 1.5 million tonnes, the China National Grain and Oils Information Centre (CNGOIC) said in a report.

  

The centre said the big price difference between imported and domestic soy remain unchanged as the amount of imports stayed high.

  

The soyoil market remained bullish on anticipation of strong demand ahead of the New Year holidays. Domestic physical soyoil prices remained steady or rose slightly on expectation of tight supply.

  

The soymeal market went up as traders and feed mills were building inventories after the fall of domestic soymeal prices. However, the market was expected to remain weak in the coming weeks following large arrivals of low-cost soy imports.

  

On the other hand, the wheat market remained strong on the anticipation of robust demand from flour mills. The government may raise its bidding prices at weekly wheat auctions and sales of flour were seen increasing in December.

  

The corn market weakened from last week, pressured by more supplies from farmers in the northeast. A government plan for more purchases that has yet to be implemented failed to support prices.

  

Corn prices in the north declined due to weak demand from processors. Feed mills in the south were building stocks, but failed to push up prices there while many trading firms were not buying corn from the domestic market.

  

The short-grain rice market weakened despite Beijing increasing its purchase amount for state reserves. Sales were sluggish in consuming areas. Supplies were ample since farmers have boosted their sales to take advantage of Beijing's stockbuilding plan.

 

China has agreed to buy another 14 million tonnes of grains, including rice, corn and soy, to support domestic prices and protect farmers' incomes from sliding.

   

The centre gave the following index data.
 

 

Deccember 3

November 26

November 19

Soy

52.5

51.9

50.6

Soymeal

49

47.5

45

Soyoil

53.3

52.5

53.3

Corn

46.7

47.4

46

Wheat

56.7

56.2

54.3

Rice

50.6

51.3

50.6

  
A reading below 50.0 indicates participants are bearish, a reading of 50.0 indicates they are neutral and a reading above 50.0 indicates they are bullish.

 

Source: Marketing Monitoring Division, CNGOIC.

 

NOTE: The indexes are based on data collected from 400 market participants, including storage firms, oilseed processors and traders in China's 17 major producing and consuming provinces.

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