March 3, 2004

 

 

China Cancels Argentine Soyoil Purchase

 

China has cancelled three cargoes of soyoil purchased from Argentina, US grains exporters said on Tuesday. The cancelled purchase is a clear indication that high soy prices will have to undergo downward correction.

 

There was also talk that China, the world's top soybean buyer, scrapped purchase of a cargo of U.S. soybeans. Traders also said plans were afoot to import soyoil into the United States, the world's top soybean exporter, from South America.

 

The talk, which could not be independently confirmed, fed a sharp late tumble in CBOT soy complex futures on Tuesday.

 

March soybeans closed down 31-1/4 cents a bushel to $9.31 after rising to a 15-1/2 year high at $9.79-1/2 in the morning. March soyoil closed 1.22 cents lower at 33.35 cents a pound after setting a new 19-year high at 35.03 cents. March soymeal closed down $3.90 at $280.00 per ton after a 6-1/2 year high.

 

Dwindling U.S. soybean supplies and weather woes in Brazil, which have delayed the harvest in the second-largest soy exporting country, have been driving the torrid CBOT rallies.

 

But exporters said high prices had begun to cool demand for U.S. soybeans, noting that cash basis values in Brazil have been falling despite forecasts for production this year being steadily scaled back due to weather problems.

 

"The world soybean market is not functioning anymore because prices are too high," one U.S. exporter said. "China has canceled three cargoes of oil, of 20,000 tonnes each," the exporter said. "It's definitely a message, it's a key reversal in prices," he added.

 

Chinese crushers have been hit with poor profit margins as meal demand declines as China battles a deadly bird flu that has killed or led to the culling of millions of chickens.

 

Another U.S. exporter said there was talk that two U.S. companies were planning to import soyoil from South America.

 

He said the talk was that one company was planning to import two cargoes of 30,000 tonnes each for a food company, and that a second firm was looking to import 150,000 tonnes.

 

The exporter said U.S. soyoil prices were now quoted at around $777 per tonne FOB, which excludes shipping costs. That compared with around $650 per tonne for Argentine supplies.

 

"On paper, it works," the exporter said, referring to imports being economically feasible. But he said it could take up to two months before the soyoil is shipped to the U.S. Gulf, processed at a Midwest plant, and supplied to the end-user.

 

"You add the time involved, it might not seem all that workable after all," the exporter added.

 

There was also talk that soyoil may be imported from Bolivia due to absence of a U.S. import duty. "There's an exclusion clause for soyoil from Bolivia," he added.

 

He however said Bolivia sells nearly all of its soyoil to Colombia and Venezuela.