April 18, 2007

 

China's record soy import raises concerns in Beijing

 

 

China's soy imports were expected to rise 15 percent to a record 31 million tonnes in the year ending September from the year-ago period, a government analyst said on Tuesday (Apr 16) at a grains conference.

 

Demand is expected to increase as China's crushing industry expands capacity, which has already hit 80 million tonnes, Li Ke, an analyst with the China National Grain and Oils Information Centre said.

 

However, part of the capacity remains unused as soymeal demand from the feed industry is weak currently.

 

Average monthly imports of 3 million tonnes are expected from April to September. China, the world's top soy importer, bought 12.7 million tonnes of soy in the last half-year.

 

Even in the face of weak animal production, Li estimated the country's soymeal demand from the feed industry to grow about 7.7 percent to 28.5 million tonnes in 2006/2007 from a year earlier. This is despite growth rates having dropped more than 10 percent in the previous year.

 

China's rising soybean imports have also raised concerns in the government. The commerce ministry last year required all importers to report details of their cargoes after the contracts were signed, raising worries that it may step in to control soy imports.

 

The large volumes of soy imports were believed to have caused a drop in domestic production. Soy imports last year of 28 million tonnes is already more than double that of domestic production (8 million tonnes) and had hurt soybean production, particularly in Heilongjiang province, Liu Li, a division chief with the commerce ministry told the conference.

 

However, he assured the industry that the reporting measures would serve to monitor the market and not hurt imports.

 

Chinese buyers now have two major production regions to choose from, the US and the South American countries of Brazil and Argentina As freight charges are climbing, prices of US soy have become more expensive and thus drove more buyers to South American soy.

 

Freight rates for shipping grains in a modern Panamax vessel from the US to Asia have climbed almost 30 percent in recent months.

 

Moreover, South American soy have been traditionally cheaper and prices are expected to go lower still with a bumper crop expected.

 

China's 28-million tonne soy imports are relatively evenly distributed among the US (9 million tonnes), Brazil ( 11 million tonnes) and Argentina ( 7 million tonnes). 

 

A US soybean broker conceded that cheaper prices are drawing China, the US soy industry's largest customer away. US soy prices are much more expensive than South American prices, even before freight charges are added in, he said.

 

Chinese soybean buyers are now buying up more Argentine beans as they are cheaper than Brazilian ones due to lower production costs and cheaper inland transportation.

 

Moreover, prices has been lower than usual this year, which offset higher freight charges. Argentina's beans are now US$0.40 cheaper per bushel (FOB) than Brazilian ones.

 

On the other hand, there are signs that China's soy imports may slow down as well.

 

Already, large soymeal stocks in China are hurting soy processing margins and causing crushers to import fewer supplies. China's 2.1 million-tonne import in March was down nearly 19 percent from a year earlier.