July 18, 2011


China's soy imports expected to recover in H2 


China's soy imports are likely to recover in the second half of this year from the sluggish demand seen since late last year, but the market will remain cautious on government policies, traders said.


Weak feedmeal consumption, especially from the pig industry, and government policies preventing companies from hiking vegetable oil prices due to inflation concerns dampened China's soy demand in the first half.


Imports in the first six months of this year were 23.71 million tonnes, down 8.1% from the same period last year.


"Large imports last year helped to build up stocks and hurt imports, but imports are expected to recover gradually later this year," said Zhang Yuehua, the chief of the agricultural department under the foreign trade department of the Ministry of Commerce.


A hog supply shortage due to rising corn prices and epidemics have hurt China's soymeal demand and contributed 1.4 percentage points to annual inflation of 6.4% last month.


Traders said soymeal demand had recovered somewhat since last month, but it would take time for stocks to be digested.


"Soy imports in Q3 will definitely remain sluggish," analysts said.


Industry participants expect oilseed demand in the second half to recover; the only question is whether the turnaround point will appear in the third or fourth quarter, said an official with state-owned Sinograin Oils Corp.


Traders expected soy imports in the 2010-11 crushing year started in October to be even or slightly higher than last year, reversing the decline in the first half.


Soy imports in the 2010-11 crushing year were expected to total 51.6 million tonnes, up 2.5% on-year, said Zhang Jinjun, a deputy general manager with the oil and oilseeds department under state-owned COFCO Ltd.


Besides feedmeal demand, government policies were being closely watched.


"Tightening policies are likely to be eased in the second half, and we will watch if the government will intervene in the price hike by Luhua (peanut oil)," said a foreign oil trader.


China has lifted a seven-month price cap on retail vegetable oil prices, but traders still remain cautious over price hikes.


"The 6.4% rise in the consumer price index (in June) could be this year's peak, and (is seen easing) with the likely grain harvest and (easing pork prices)", said Pan Jiancheng, deputy chief of the China Economy Boom Monitoring Center under the National Bureau of Statistics.

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