August 11, 2003

 

 

China Soymeal Weekly Report: Significant Increase In Soymeal Prices Across All Regions in China

An eFeedLink Exclusive Report

Soymeal prices for the week ending August 8 were generally higher as a result of a shortfall in the current stockpiles. The extent of the price increase was greater in some of the leading producing and sales regions.


On August 8, the prices of medium-grade soymeal in China were as follows:  

    • Ex-warehouse prices in Heilongjiang province ranged between RMB2100-2140/ton, an increase of RMB30/ton from the previous week. In Changchun, Jilin province, ex-warehouse prices rose RMB30/ton from the previous week to RMB2120/ton. Warehouse prices in Dalian, Liaoning province and Dalian port averaged RMB2100 and RMB2130/ton respectively, an increase of RMB50-60/ton from the previous week;
    • In the Jingjin and Shijiazhuang regions, ex-warehouse prices rose RMB10-20/ton to RMB2180/ton. Ex-warehouse prices in the Shandong province rose RMB0-10/ton from the previous week to RMB2130-2150/ton. In Henan province, ex-warehouse prices were RMB2180/ton, an increase of RMB20/ton from the previous week;
    • In the Jiangsu and Zhejiang provinces, ex-warehouse prices rose between RMB40-50/ton from the previous week to RMB2200-2220/ton. Delivered-to-factory prices in the Shanghai region, Hunan and Hubei provinces were RMB2220/ton and RMB2250/ton respectively, an increase of RMB30/ton from the previous week;
    • In central Sichuan, delivered-to-factory prices rose RMB20/ton to RMB2250/ton. Port delivery prices in Fujian and Guangxi provinces were RMB2220/ton, an increase of RMB40/ton from the previous week. In Guangdong province, port delivery prices rose RMB30/ton from the previous week to RMB2200/ton.

Lately, the AQSIQ (General Administration of Quality SupervisionInspection and Quarantine of the People's Republic of China) informed the embassies of the U.S., Brazil and Argentina that, in view of the serious quality issues inherent in the U.S. and South American soybeans dealt by the countries' three international traders, a decision has been made to terminate the soybean exports to China from these three companies.

 

In addition, according to some CBOT sources, soybean exports from four U.S. and three South American companies have been rejected by China. The move by the AQSIQ is expected to have a relatively significant impact on the soybean, soymeal and feed markets; in particular, the ingredient procurement costs for the animal production and feed industry are likely to increase.

 

On the other hand, the move may also signal the government's efforts to manipulate the soy market; especially with the impending entry of the new soybean into the market, the government is unlikely to allow the prices to fall, thereby incurring losses to the farmers. However, as the measure is still being implemented, a lot of uncertainty exists. Hence, till date it can only be considered as an effort to sustain the market. Whether prices will rise substantially will also depend on the shifts in other primary factors.

It is understood that many ships carrying soybean imports are still at the ports. Moreover, each ship has to pay demurrage charges on a daily basis, thereby pushing up the costs for imported soybeans. Some traders believe that the high imported soybeans costs will persist until the end of October.


Domestic soymeal prices continue to remain high in July. This is primarily due to the consistently high prices of current soybean stockpiles both locally and overseas, as well as the fall in soy oil prices which compelled many factories to uphold the ex-warehouse prices of soymeal. Some of the enterprises, unable to sustain the losses brought forth by rising ingredient prices and processing costs, can only choose to either stop or cut back on production.


Earlier, market observers have expected soybean production in Heilongjiang to be on par with, or slightly higher than, last year. However, due to droughts and water logging, some companies have recently begun to project a reduction of 100 tons or more in Heilongjiang's new soybean production. On the whole, state produced soybean in the new quarter is likely to fall below last year, while climatic conditions also pose concern to the quality of the soybeans in the new quarter. This concern necessitates support for domestic soybean prices in the near term.


In the International market, CBOT prices for soybean have recently begun to stabilize at around US$5.20/bushel, following a continual slide. In the meantime, market observers are waiting for U.S.' August report, which will contain new analyses of U.S.' soybean production for the new quarter, to be released. It is also the final critical report for 02/03.


On the whole, the reinforcement policies in place and the relatively high costs of soybean imports meant that soybean prices in the near term are not likely to fall too much, in turn keeping soymeal prices high. In addition, from the closing of the August soymeal contracts, only ten deals of the soymeal volume in the warehouse are scheduled for completion of business transactions.

 

Based on the remaining August soymeal stockpiles in the warehouse, in the nearing deadline it is likely that a shortfall will result at the point of transaction completion, once again pushing up Dalian soymeal prices, in a way sustaining the current soymeal stockpiles. As such, it is unlikely that soymeal prices will fall in the short-term; on the contrary, prices will stay high and are likely to increase further.