July 14, 2003

News of Changes in China's GMO Policies Lifted Soymeal

Prices (July 11, 2003)

An eFeedLink Exclusive Report

Soymeal prices in China generally moved higher during the week ended July 11.  The upward price movements were caused mainly by recent news on possible changes in China's GMO policies.

As of July 11, movements in prices of medium grade soymeal were as follows: 

•             Ex-factory prices in Heilongjiang province surged by RMB 20-40 /ton during the week to RMB 2080-2120 /ton; while prices in Changchun (Jilin province) increased by RMB 20 /ton to RMB 2120 /ton.  Ex-factory prices in Beijing, Tianjin and Shijiazhuan also rose by RMB 10/ton to RMB 2160-2180 /ton; while prices in Shangdong province registered an increase of RMB 20-30 /ton over last week's to RMB 2160 /ton.  Similarly, in Henan, Jiangsu and Zhejiang provinces, ex-factory prices increased by RMB 20-40 /ton to RMB 2180 /ton during the week; 

•            On-board prices in Dalian (Liaoning province) and at Dalian port registered a rise of RMB 20 /ton during the week to RMB 2080 /ton and RMB 2100 /ton respectively; 

•             Delivered-to-factory prices in Shanghai increased by RMB 30 /ton over last week's to RMB 2200 /ton.  Similarly, delivered-to-factory prices in Hubei/Hunan provinces and Central Sichuan province also rose by RMB 30 /ton to RMB 2220 /ton and RMB 2240 /ton respectively; 

•             Delivery prices in Fujian province, Guangdong province and Guangxi port remained unchanged at RMB 2200 /ton.   

Recently, news on the implementation of new regulations pertaining to the application of temporary import permit for import of GMO products into China, effective from July 20, attracted the attention of market participants.  It is learned that China's GMO Office will require all foreign companies applying for registration of their product labels to submit details of their temporary import permit.  Additionally, following the return of Chinese officials after their meeting on GMO policies held in the US, announcements on the implementation of new GMO policies is expected soon from the relevant State authority.       

On July 3, Beijing's Bureau of Agriculture conducted a sample check on GMO product labeling among 14 selected enterprises, covering a total of 22 brands, including well-known ones like "Fu Lin Men" and "Jin Long Yu".  All were without GMO labeling.  Among them, the "Jiusan" brand of soymeal produced by Heilongjiang Jiusan Oil Group of Companies was found to contain genetically modified ingredients.  This aroused considerable market attention.

Lately, news regarding the setting up of new crushing operations and expansion of existing crushing facilities had been circulating in the market.  Some of these new crushing operations have started their trial runs.  Increases in market supply of soymeal in China's domestic markets are therefore expected, with pressures on existing stockpile maintained by producers.  Some soymeal producers have started to plan for temporary reduction in working hours or phased stoppage in soymeal production, to keep a hold on soymeal prices.  Some feed enterprises also indicated that with faster arrival of imported soybeans at Chinese ports as well as the expected increase in production and stockpile of soymeal, they are shortening their purchasing cycle for soymeal, to prevent excessive fluctuations in soymeal prices.

China's import of soybean and soy oil is expected to hit record levels this year.  According to available statistics, total import of soybean for the current year is expected to reach 19 million tons, an increase of 7.69 million tons (68%) over last year's import.  Similarly, import of soy oil will also increase significantly, by 830,000 tons (95%), to 1.7 million tons this year.  The higher cost of imported soybean and lower prices of imported soy oil will impact soymeal prices favorably, providing some support to any downward slide in soymeal prices.

China's domestic prices of rapeseed continued to move in tandem, falling sharply with the downward slide in US' market on Friday.  On account of recent news on changes in China's GMO policies, prices of rapeseed meal in China rose significantly during early part of the week; but fell with the drop in rapeseed prices on Friday.

Overall, in the near term, with expected changes in China's GMO policies, soymeal prices are likely to remain firm.  However, the anticipated increase in China's soymeal production is likely to exert some downward pressure on long term movement of soymeal prices.  Price direction will be largely influenced by of movements in rapeseed and US' soybean prices.