July 3, 2008


China's Dalian declares soy minimum baseline in midst of rising prices


The Dalian Commodity Exchange (DCE) forecast on Friday that China's soy baseline price will be RMB 4,100 ($597.67) per tonne this year, based on rising cultivation costs.


According to the DCE, soy cultivation costs for this year will stand at RMB 3,750 (US$546.65) per tonne, a 23-percent increased based on last year's figure.


Factoring farmers' wages the baseline price would be a minimum of RMB 4,100 per tonne.


The forecast follows a trend of rising spot soy prices which begun last year.


Rising prices in turn have encouraged more soy planting in China.


In the major soy production region of Heilongjiang Province in northern China, soy acreage is expected to increase 13.3 percent ( 4 million hectares) compared to last year.


The increased soy acreage comes mainly at the expense of corn production, which was reduced 10 percent  (3.13 million hectares) over the past year.


DCE officials forecast soy production in Heilongjiang will rise 32.65 percent from last year.


In 2007, soy in the Dalian Exchange debuted at RMB 3,600 (US$524.78) per tonne. However, within the first month, the price had risen to RMB 4,600 (US$670.55) per tonne as international prices rose, and hit a high of RMB 6,000 (US$874.64) per tonne at the beginning of this year.


Increasingly, China's soy prices will be guided less by domestic production but by the international markets, particularly the US, since the country now relies increasingly on imports, analysts said.

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