March 12, 2007

China's soybean prices up on crushers' buying; upside limited

Soybean prices in China's major producing regions continued to rise in the week to Friday (Mar 9), but analysts and traders said further upside is very limited, given weak soymeal and soyoil prices.

In Harbin, the provincial capital of Heilongjiang province, China's largest soybean growing region, prices of average quality soybeans were around RMB2,860-2,900 a tonne versus RMB2,800/tonne a week ago.

Prices in the north-eastern part of the province rose to RMB2,800/tonne from around RMB2,660-2,680/tonne a week ago.

"Farmers now only have about 20 percent of their harvest, while at the same time last year, there was still 40 percent left, and this low stockpile led crushers to buy actively," said Zhang Liwei, an analyst at the

China National Grain and Oils Information Centre.

Zhang said sales will probably be finished in April at the current pace, and then imports will play a major role in the spot market.

But domestic soybean prices aren't expected to rise further next week and may not be able to stay at high levels, said traders.

"Many crushers weren't able to keep their books balanced after soybean prices rose quickly earlier this week while soyoil and soymeal prices were falling, and very likely, crushers will slow down buying," said a trader in Beijing.

A cheap and large volume of soyoil imports since December has been weighing on local soyoil prices, with no particularly strong demand to alleviate the pressure, said market participants.

"Anyway, I don't think there's any reason that can drive up soybean prices further next week," said the trader.