July 21, 2003


China Soybean Crush Margins Down Amid Weaker Product Prices

China soybean crush margins were mostly lower in the past week, weighed down by relatively weaker product prices, local traders and analysts in China said Monday.


"The margins were further eroded recently, as prices of imported soybeans remained firm, despite the heavy arrivals, but soymeal and soyoil markets were generally weak across China," a trader from a Hong Kong-based oilseeds company said.


In Dalian and Guandong, crush margins for imported soybeans have already turned negative, with prices of soymeal falling 40 yuan to 100 yuan ($1=CNY8.277) a ton in the past week, said the trader.


In Shandong, Shanghai and Jiangsu, local crushers managed to keep a thin margin of CNY40 to CNY50 for processing one ton of imported soybeans, thanks mostly to firmer soymeal prices in these regions, traders said.


Monday, soymeal was quoted at CNY2,130-CNY2,150/ton in Shandong and eastern China, about CNY30 lower than last week.


In June, China imported a total of 2,491,159 tons of soybeans, 517% higher than imports in the same month of 2002. In the first six months of 2003, imports totaled 10.2 million tons of soybeans, 212% higher than imports in the same period of 2002, according to the latest custom data.


Despite such heavy imports, however, prices of imported soybeans remained firm around CNY2,640/ton at ports in China, traders said. Local crushers have to pay CNY2,660-CNY2,700/ton to get imported beans to their mills.


"Most of the small crushers in northeastern China have been out of operation, due to lack of raw materials. The soybean auction will be a positive (development) for these small players to resume their operation," said a trader from a local brokerage house in Dalian in Liaoning province of China  Monday.


China will auction the first batch of 500,000 tons of locally produced soybean July 29, as part of the government's plan to sell 800,000 tons of soybeans from state reserves, according to a notice from the local grain exchange in Dalian last Friday.


"Auction prices will be closely watched by market participants, as they will determine if the crush margin (remains) in red," added the first trader.

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