December 11, 2009

China soy buyers slow purchases ahead of incoming supply

China's procurements of imported soy slowed down as buyers anticipated a possible weakening in international prices ahead of a sizeable South American crop and large arrivals in the coming months.

According to an official survey by the China National Grain and Oils Information Centre, as some market participants expected international soy prices to fall for a short period of time, it in turn affected their replenishment interests.

Beijing's subsidies to some crushers in the northeastern region have also lowered the cost of crushing domestic soy while others put on hold their import plans before the South American soy harvest.

Meanwhile, the subsidies to crushers in the northeast have led to increased purchases of domestic crops by these plants.

The centre added that rising domestic soyoil and soymeal prices gave soy plants better crushing margins in November, which reached as high as RMB520 (US$76.15) per tonne. However, the margins are likely to narrow in December and January due to large soy arrivals.

Soy imports in January could reach 4 to 4.5 million tonnes, which may even rise to 4.6 to 4.8 million tonnes due to higher imports this month.

The soyoil market is likely to remain strong as traders stockpile their inventories ahead of the Spring Festival which falls in February.

However, the soymeal market is seen soft as many processing plants have lowered their December and January prices.

Meanwhile, the corn market was strengthened as the tight railway transport capacity delayed supplies to the southern consuming provinces. Corn prices were given further support as processors in the northeastern region raised their purchase prices to ensure they have ample supplies.