August 18, 2003



China Soymeal Market Weekly Report: Soymeal Prices in China Continue to Rise


An eFeedLink Exclusive Report


Soymeal prices across China continued to rise significantly for the week ended August 15 due to an acute shortfall in current supply. As at August 15, prices of medium grade soymeal were as follows: 

    • Ex-warehouse prices in Heilongjiang province increased by RMB40/ton from the previous week to RMB2140-2180/ton. Likewise, prices in Changchun, Jilin province, increased by RMB40/ton from the previous week to RMB2160/ton. Dalian, Liaoning province and Dalian port prices averaged RMB2170/ton and RMB2200/ton respectively, an increase of RMB70/ton from the previous week; 
    • In the Jingjin and Shijiazhuang regions, ex-warehouse prices increased by RMB40/ton from the previous week to RMB2220/ton. Ex-warehouse prices in the Shandong region increased between RMB50-70/ton from the previous week to RMB2200; 
    • In Henan province, ex-warehouse prices were RMB2220/ton, an increase of RMB40/ton from the previous week. Ex-warehouse prices in the Jiangsu and Zhejiang regions increased by RMB20-40/ton from the previous week to RMB2240/ton; 
    • Delivered-to-factory prices in Shanghai increased by RMB40/ton from the previous week to RMB2260/ton; 
    • In Hubei and Hunan provinces, and central Sichuan province, delivered-to-factory prices increased by RMB30/ton from the previous week to RMB2280/ton; 
    • Delivery prices in Fujian and Guangxi ports increased by RMB40/ton from the previous week to RMB2260/ton, while in Guangdong, delivery prices increased by RMB60/ton to RMB2260/ton. 

For the domestic soy market this week, the most pertinent signals were the vague measures by China to restrict soy imports as well as the August reports of lower new soy production and reduced soy stockpiles from the U.S. Agricultural Ministry. The Chinese government's decision to permit imports of soy and soy products from the U.S. and South America, while barring partial soy imports from the ports on the grounds of sub-tandard quality lent a strong performance in the domestic soy market.


The escalating soymeal prices due to the consistently high soy (raw ingredient) prices coupled with the rejection of partial soy imports at the ports compounded the existing problem of tight soymeal supply, further pushing up the soymeal prices. Industry insiders opined that this is a conscientious effort by the government to stabilize soy prices before the release of new soy in the market to protect the interests of the farmers.


In response to the latest August figures from the U.S. Agricultural Ministry projecting a substantial reduction in new soy production and lower soy stockpiles, CBOT prices for soy for the past week rose significantly, stimulating a price increase in the domestic soy market. Propped by Dalian soy, Dalian soymeal prices moved in an acceptable direction and Dalian soymeal 308 was transacted at RMB2280/ton.


Theoretically, the final volume transacted upon business completion should hit 6620 tons, but the figure was nowhere near one ton, according to the post market stockpile weekly report. This clearly reflects the tight soymeal supply in the current market.


In the face of consistently high soymeal prices, oil refineries should be making profits, though not the feed enterprises. In fact, changes can still take place in the market in the short-term. Firstly, new standards for edible oil are implemented. As the September release of new soy in the market approaches, the government becomes increasingly stringent with producers to adopt labels of genetically modified soy oil. This gives rise to concern among the producers that the soy oil consumption may be affected, which will inevitably affect the soymeal market. However, it may be too premature to determine the long-term consequences at this juncture.


Overall, the domestic soymeal market in the short-term will remain robust. However, it is also likely to undergo significant changes later, in the face of the apparent governmental regulations and definite changes to the U.S.' soy production. Thus, apart from keeping a positive outlook, traders felt that it is advisable to remain cautious with respect to the soymeal market in the long run.