August 10, 2011

 

China purchases to boost palm oil, soy trade

 

 

A rebound in Chinese buying has given hope to prices of palm oil and soy even as they set multi-month lows, Oil World predicted.

 

The influential analysis group termed as "limited" the potential for further losses in palm oil prices which, on Kuala Lumpur's futures market, ended at a five-month closing low of MYR2,920 (US$973.09) a tonne on Tuesday (Aug 9), depressed by the broad sell-off of risk assets.

 

The analysis reflected "current strong world import demand" for palm oil, with orders up sharply in Europe, India, Pakistan and, notably, China, where inventories of vegetable oils are believed to have been severely depleted by a knock-on effect of price controls.

 

"China has reportedly been a strong buyer of palm oil in recent weeks and we are likely to see rising Chinese imports in August and September," Oil World said.

 

The comments come ahead of official data due on Wednesday from Malaysia, the second-ranked exporter, expected to show a 3% rise, on-month, to 1.63 million tonnes in shipments.

 

Oil World also forecast a rebound in Chinese imports of soy from major exporters Argentina, Brazil and the US, with the figure set to hit 6.65 million tonnes this month, up some one million tonnes from last month's figure, and up more than 2.3 million tonnes from June.

 

"There are now indications that Chinese buying has picked up," the German-based analysis group said. "We consider it likely that the US will resume exporting soy to China in August." 

 

The comments follow a series of orders by China of US soy, which have renewed hopes for trade after the USDA last month cut its forecast for China's imports in 2011-12 by 1.5 million tonnes to 56.5 million tonnes.

 

"Demand by China's soybean crushers [in 2010-11] has continued to stagnate," the USDA said last month, noting that price controls had left processors with "unprofitable margins". At the same time, the growth in soybean meal consumption has been too weak to counter the losses in oil processing. So soybean imports have slowed to avoid adding to surplus stocks at the country's ports."

 

Rabobank two weeks ago reported that Chinese soy crushers' margins had turned positive.

 

Oil World's report also came as Chicago's November soy contract fell on Tuesday to US$12.82 a bushel, its lowest since March, depressed by the broader market liquidation.

 

The market recovery helped the lot rebound to US$13.10 a bushel as of 16:40 GMT, down 0.1% on the day.