July 13, 2011

 

 

China's soy imports in 2011 are difficult to rise on-year as local cooking oil processing mills have been cutting purchases of raw materials due to losses for several months, according to reports.

 

The latest data from the General Administration of Customs show that the country's soy imports in June reached 4.3 million tonnes, a slump of 30.6% from the same period of last year and 5.7% from the previous month. The imports in the first half totalled 25.8 million tonnes, down 8.1% on-year.

 

Domestic soy crushing enterprises have reduced their operating rate since November of last year weighed by persistent losses. Heavy stocks and losses in edible oil production have pushed some mills to adjust their soy import plans.

 

Some insiders predict that China's soy imports in the August-September period will drop significantly, with monthly volume below four million tonnes.

 

Currently, soy stocks at ports are about seven million tonnes, far higher than the normal level of 4-5 million tonnes.

 

Soy crushers' operating rate is 20-30% this year, lower than the usual level of 40-50%. Small-package edible oil producers incur losses of around RMB200 (US$31) for crushing one tonne of imported soy, experts said.

 

The price caps on edible oil were a major factor for their losses. To combat inflation, the Chinese government introduced price controls on edible oil in November of last year and extended them in April, informally requiring major grain processing enterprises including Wilmar International Ltd, COFCO Ltd and Chinatex Corp to limit price rise.

 

By far, in the backdrop of rising inflation pressure, China hasn't yet lifted price caps on cooking oil which should have expired in early June, industry insiders said.

 

To make up losses caused by price capping policy, the government has launched several batches of reserves sales to major grain and oils groups at below-market prices this year. However, insiders pointed out that the sales volume of rapeseed oil and soy can only maintain market supply for one to two months.

 

Meanwhile, prices of imported soy rose from RMB4,100-4,200 (US$634-649)/tonne to RMB4,300-4,400 (US$665-680)/tonne, which has further increased edible oil enterprises' cost pressure.

 

Now China's imported soyoil prices are RMB10,400 (US$1,608)/tonne, compared with RMB9,700-9,800 (US$1,500-1,516)/tonne for domestic soyoil. Domestic soyoil prices are expected to approach those on the international market given the lift of price caps.