Cancelled China soy imports talk not likely a trend

 

 

If market talk that Chinese importers have cancelled several recent US soy import shipments proves true, the cancellations were probably be due to panic over swine flu and not indicative of any trend, analysts said Wednesday (April 29).

 

The global spread of swine flu could reduce demand for pork and hence feedmeal, traders and analysts said.

 

"The current domestic situation is different from in 2004, when many crushers cancelled their cargoes as they couldn't afford them," said Pei Yong, assistant manager at Chinatex Grains & Oils Import & Export Corp.

 

After industry consolidation in 2004 most domestic crushers expanded, and adopted effective risk management systems, including arbitrage strategies, he said.

 

So far the outbreak has been limited to humans - it hasn't spread to hogs yet, said Ju Wei, a futures analyst with Heilongjiang Jiusan Oil and Fat Co.

 

Soy and soymeal futures traded on the Dalian Commodity Exchange clawed back some of Monday's 5 percent limit-down losses Wednesday, settling 0.7 percent higher at RMB3,307 a tonne, suggesting market participants were less worried about the flu outbreak.

 

The World Health Organization over the weekend said swine flu could develop into a global pandemic. Monday, it raised its pandemic alert to phase 4 from phase 3.

 

Traders and analysts contacted by Dow Jones Newswires said they won't be too concerned about swine flu unless the outbreak actually escalates to pandemic proportions.

 

Rising global soy prices and falling domestic soymeal and soyoil prices have eaten away at crushers' profits, and if they buy now, they will be making losses, an analyst said.

 

Last week, the Ministry of Commerce asked Chinese companies to slow soy and rapeseed imports to avoid risks associated with swollen inventories.

 

China imported 10.15 million tonnes of soy and 625,802 tonnes of rapeseed in the first quarter, up 30 percent and 99 percent on year, respectively, as the government's purchases of local soy resulted in domestic prices that were higher than global prices.

 

"Importers are sure to consider slowing imports after the commerce ministry's alert, but cancelling cargoes will add costs and isn't the best choice for most crushers - if they want to maintain market share," Pei said.