July 28, 2003



China Soymeal Cash Market Stable, Soymeal Futures Seen As Highly Volatile


An eFeedLink Exclusive Report


For the week ending July 25, soymeal prices in China were unchanged from the previous week.


Soybean and soyoil imported into China in the month of June totaled 2.49 million tons and 126,900 tons respectively, according to the latest statistics from Chinese Customs.


Cumulative total for soybean and soyoil imports during the first six months of 2003 was 10.15 million tons and 504,600 tons respectively.


China's exported 116,100 tons of soymeal in the month of June, bringing the total exported during the first half of 2003 to 393,400 tons.


Since the beginning of the year, China's strong imports of soybean and soyoil caused many uncertainties in the domestic soymeal market. However, the recovery in demand from the animal production industry after the SARS outbreak has provided some support for the soymeal cash market.


According to foreign traders, the Chinese authorities may activate a plan to halt the import of soybeans for a one-month period beginning from end Sep. Such a move will reduce imports and support prices of locally-produced soybeans.


Such a claim may or may not be true. However, just as in previous years, the Chinese authorities are likely to intervene when the new domestic soy crop hits the market, to prevent prices of locally-produced soybeans from falling too sharply.


Recently, some areas in China have shown keen interest in GMO labeling, following the review of GMO product labels by Beijing. From the latest developments, the expansion of GMO product labeling throughout China may be a natural process.


Although it is still too early to evaluate the impact of labeling on the overall market, labeling will certainly increase consumer awareness about GMO products. If consumers do not take to GMO products, the negative impact may spread to soy products too.


During the week, a combination of factors such as the sharp fall in CBOT soy prices, auction from state reserves, and arrival of large shipments of imported soybeans, accelerated the fall in DCE soy prices.


As at Jul 25, soymeal prices for Aug were transacted at close to RMB 2,300 /ton. Compared to the contract price in Jan which was below RMB 2,000 /ton, it had rose by more than RMB 300 /ton. However, the high price for Aug were mainly due to outstanding futures contracts with impending settlement dates in Aug.

Although the soymeal cash market has been relatively stable, the outlook for Aug and Sep is full of uncertainties such as soybean import policy, CBOT prices and the settlement of futures contracts in Aug.


Demand for soymeal is expected to increase during the seasonal peak production period. While soymeal prices are likely to fluctuate, sharp rises and falls have been ruled out.
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