April 20, 2004

China's Soy Crushers Wait For Improving Demand

Chinese soybean crushers are waiting anxiously for signs of improving soymeal demand from livestock and feedstuff producers, industry sources and analysts in China said Monday.
 
Following the Chicago Board of Trade soybean price plunge, crushers lowered the ex-factory prices of soymeal sharply early last week to attract more demand from the end users, traders said.
 
Prices of soymeal quoted by crushers in Jiangsu province, eastern China, were around RMB3,520 ($1=RMB8.277) a metric ton Monday, compared with RMB3,630/ton a week ago, traders said.
 
Trade volume failed to pick up, however, even after crushers lowered prices because most large feedstuff producer have their needs covered until late this month. Medium- to small-sized feed producers prefer to stick to a hand-to-mouth buying strategy, added traders.
 
"When soymeal prices fell, few end users are willing to buy more as they look for even lower prices," said a trader with a crusher in Tianjin, a port city in northern China.
 
The recent arrival of a cargo of Indian soymeal in southern China could also dampen market sentiments, said traders, confirmed Monday by an official from a local feedstuff producer in northern China. He didn't disclose the price details but said the quality of Indian soymeal was satisfactory.
 
Demand for soymeal could pick up in early May, after the feedstuff producers exhaust their current stocks, said traders and analysts in China.
 
A pick-up in poultry restocking in May is likely to lead to higher demand for feed ingredients, traders said.
 
"Many feedstuff producers are not so well-covered, and they would have to increase the forward coverage, encouraged by the seasonal improvement for feed demand in May, especially if CBOT soybean futures stabilize around the current level in the coming weeks," a market analyst from a local brokerage house in Beijing said Monday.
 
In the past week, the prices of U.S. soybeans for April shipment at U.S. Gulf lost about US$20/ton, quoted around $405.50 Friday, traders said, in line with the fall of CBOT soybean futures on massive fund selling.
 
But the global soybean supply tightness, which will remain until the new soybean crops hit the market this fall, could limit the downside of soybean and products markets, analysts said.
 
Global soybean stocks were pegged at 43.00 million tons at the beginning of March 2004, down by around 6 million tons from last year and 12 million tons from two years earlier, analysts said, citing the latest figure from Hamburg-based industry newsletter Oil World.
 
Lower crush levels in China, due to the poor margins, also could lend underlying support to the markets. Many crushers are maintaining operations at less than half of their capacity, said traders.