December 20, 2010

China's soy prices stay flat

Soy prices in China's major producing areas were mostly unchanged in the week to Friday (Dec 17), as soy prices stood at a reasonable level after a flurry of government measures to limit speculation and curb inflation.

Soy prices in northeastern China's Heilongjiang province were between RMB3,760-3,840 (US$565-$577)/tonne, unchanged from a week earlier.

Prices in Zhangjiagang, Jiangsu province, were around RMB4,000-4,100 (US$601-$616)/tonne, also unchanged.

With no fresh news to support or restrain soy prices, domestic demand and supply are basically balanced, analysts said.

Some domestic soy crushers have been forced to suspend operations due to razor-thin profit margins as a result of the government's price caps on edible oil and in the face of an oversupplied soymeal market, indicating soy demand could weaken.

Soy stockpiles at Chinese ports stand around 6-6.5 million tonnes, a very high level compared with about four million tonnes in the first half. This is enough to meet crushers' needs for 1.5 months under current capacity.

An auction of 191,300 tonnes of soy from Heilongjiang provincial reserves Friday failed to attract any bids, as buyers believe the floor price of RMB3,750 (US$563)/tonne is too high.

Though the floor price is lower than market rates, buyers need to pay an additional ex-warehouse fee and transportation charges. Meanwhile, the quality of the soy being sold from the reserves - harvested in the crop year that ended September 30, 2009 - is inferior to more recently harvested soy, analysts said, adding that imported soy is better value for crushers.

China's soy output rose 1.5% to 15.2 million tonnes in 2010, the state-backed China National Grain and Oil Information Centre said in a regular estimate Thursday.