December 19, 2003

Soymeal Prices in China Seen To Undergo Minor Correction in The Weeks Ahead 

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Following a modest increase in the preceding period, spot prices of soymeal in China during the week ending December 19 began to show signs of weakening. Compared to price movement last Friday, prices fell across the board by RMB20-50/ton.

• As of December 18, ex-warehouse prices of soymeal across different regions of China were as follows:
  Ex-warehouse quotations in Dalian region ranged between RMB2600-2650/ton, while transacted prices averaged between RMB2550-2600/ton;
  
  
• Ex-warehouse quotations in western and northern areas of Shandong province ranged between RMB2650-2700/ton, while transacted prices averaged between RMB2620-2650/ton;
  
  
• Ex-warehouse quotations in Lianyungang area of Jiangsu province were RMB2700-2730/ton;
  
  
• Ex-warehouse quotations in Guangdong province ranged between RMB2650-2680/ton, while transacted prices were generally RMB20-30/ton lower than the quotations.    

In general, market demand for soymeal in China was fairly weak and transacted volume was thus correspondingly low. The increases in soymeal and soyoil prices in the preceding period have led to higher crush margins, and thus crushers raised their crushing volumes. However, with little buying interest from feed millers, crushers are currently facing considerable pressure on the substantial soymeal stockpiles they have built up.

      
Recent drop in the spot prices of soymeal has dragged downward the futures prices of Dalian soymeal. Although the downslide is not substantial, it caused a chain reaction on spot prices of soymeal, thus weakening current spot prices of soymeal in China.
 

With the Chinese Railway Bureau increasing fees for railroad cargo, transportation costs of southbound soymeal is expected to rise. However, with the forthcoming peak transport season prior to the Chinese New Year holidays, transportation of soymeal will be limited. Thus soymeal stockpiles will continue to rise. This will in turn exert considerable pressure on crushers to dispose their stocks.
 

A Chinese soybean procurement delegation is currently in the U.S. With recent confirmation that China will purchase 2.5 million tons of U.S. soybeans, a figure exceeding previous expectations, there will likely be a negative effect on the domestic soymeal stockpiles in the long run.

Given the situation that imported and locally produced soybeans are on a high price level, soymeal prices in China are unlikely to fall substantially in the near future. Market analysts forecast that soymeal prices in China are likely to undergone minor correction in the immediate term.