December 29, 2010

China's state soy auction attracts no bids

An auction of 296,400 tonnes of soy from state reserves Tuesday (Dec 28) failed to attract any bids, the state-backed China National Grain and Oil Information Centre said.

This is the third time the central government's soy auctions attracted no bidders, due to ample supply and offer prices of RMB3,900-4,090 (US$589-$617)/tonne are considered too high.

China's major soy-producing province Heilongjiang sold 55,000 tonnes of soy on December 3, around a fifth of the amount offered. Follow-up auctions on December 8, 15 and 24 failed to attract any bids.

The auctions are aimed at stabilising rather than suppressing soy prices, said Wang Xioayu, deputy secretary of the Heilongjiang Soybean Association.

The auctions send signals to speculators and other market participants that soy supply is "sufficient," he said, citing record imports this year. "It's very necessary for the government to ease inflationary expectations using auctions."

Farmers can fully meet soy demand from small crushers, so the threshold for crushers to participate in the auctions - capacity above 400 tonnes a day - is unlikely to be lowered, Wang added, referring to a lower threshold set for (wheat) flour millers from Wednesday.

Flour mills with a daily processing capacity exceeding 100 tonnes will be able to buy reserve wheat from Wednesday, down from a previous 400-tonne threshold, according to revised auction rules.

Soy at China's major ports stand around 6.5 million tonnes, a very high level compared with about four million tonnes in the first half, analysts said.

Domestic importers have reduced imports given the high level of stockpiles. China's December soy imports will likely reach 5.4 million tonnes, revised downward from a forecast provided earlier this month, the Ministry of Commerce said, adding that January imports are expected to total 3.35 million tonnes.