August 26, 2003
China's Soymeal Market Weekly Report: Soymeal Prices in China Continued to Rise
An eFeedLink Exclusive Report
Soymeal prices across most parts of China continued to rise significantly for the week ended August 22 due to its termination of imports from the six major international soybean producers. Prices in the southern regions remained stable. Prices of medium grade soymeal as at 22 August were as follows:
Ex-warehouse prices in Heilongjiang province rose RMB40/ton from the previous week to RMB2180-2220/ton;
Ex-warehouse prices in Jilin province's Changchun city rose RMB40/ton from the previous week to RMB2200/ton;
Average ex-warehouse prices in Liaoning province's Dalian city and Dalian port rose RMB10/ton from the previous week to RMB2180/ton and RMB2210/ton respectively;
Ex-warehouse prices In the Jingjin and Shijiazhuang regions rose RMB30-40/ton from the previous week to RMB2250-2260/ton;
Ex-warehouse prices in the Shandong region rose RMB20-30/ton from the previous week to RMB2220-2230;
Ex-warehouse prices in the Henan province rose RMB20/ton from the previous week to RMB2240/ton;
Ex-warehouse prices in the Jiangsu and Zhejiang regions rose RMB20-30/ton from the previous week to RMB2260-2270/ton;
Delivered-to-factory prices in the Shanghai region rose RMB40/ton from the previous week to RMB2300/ton;
Delivered-to-factory prices in Hubei and Hunan provinces rose RMB40/ton from the previous week to RMB2320/ton;
Delivered-to-factory prices in central Sichuan province rose RMB40/ton from the previous week to RMB2320/ton;
Delivery prices in Fujian, Guangdong and Guangxi ports remained unchanged from the previous week at RMB2260/ton.
The biggest impact on domestic soymeal market this week was undoubtedly the decision by China's government to discontinue the import of soybeans from the six major international exporters. One reason for the decision is the serious quality problems related to the soybeans imported earlier, where health-threatening germs were discovered; on the other hand, the importers of soybeans violated certain regulations in the import process, resulting in a dramatic increase in the volume of soybeans imported this year.
Since the government decided to control the volume of soybeans imported through the issue of Quality Inspection Certificates, prices of soymeal in the country have soared due to the shortage of supply. In addition, with the end of the SARS outbreak, the breeding industry in the country has recovered, leading to a huge leap in demand for soymeal, thus pushing up the prices of the feed which has continued to the present.
However, recently, the Quality Inspection Bureau has once again accelerated the issue of quality inspection certificates, speeding up the offloading of soybeans which have been held up at the ports earlier. It is predicted that future supply of soymeal would increase, and price pressure would re-surface.
Information from a relevant source said that the Ministry of Agriculture has previously announced that if the soybeans supplied by foreign exporters arrive at the ports in China after September 20, they would have to apply for new Safety Certificates from the Ministry of Agriculture. This means that soybeans that are still held up at the ports by September 20, as well as the need for soybean importers to re-apply the said certificates from the Ministry of Agriculture after September 20, would lead to an increase in import costs.
According to Customs statistics, China imported 160,000 tons of soybean oil in July, imports for soybean oil from January to July was 560,000 tons, imports for the first seven months rose 658% year-on-year. China imported 2.12 million tons of soybeans in July, imports for soybean from January to July was 12.27 million tons, imports for the first seven months rose 146.9% year-on-year.
China exported 813,000 tons of soymeal in July, exports for soymeal from January to July was 477,500 tons, a fall of 32.4% year-on-year. From these statistics, we can see that soymeal exports has not performed well this year. The increase in the import of soybean oil revealed the strong domestic demand for the product as well as the competitive pressure foreign soybean oil has exerted on domestic supplies, affecting the consumption of locally-produced soybean oil to a certain extent.
Prices of CBOT soymeal has been on the rise this week, the main reason being the hot and dry climate has continued to lower the ratio of good-quality soybeans, leading to a dramatic rebound in soybean prices which has remained on a high, concurrently spurring the prices of soymeal. The rise of soybean and soymeal prices internationally have helped support the prices of these products in China.
Overall, as soybeans continue to be offloaded at the ports, the volume of processed soymeal would increase, leading to an inevitable fall in soymeal prices. However, with September 20 approaching, new changes are expected with respect to the import of soybeans; in addition, domestic importers are unwilling to sign new import agreements for now, this could lead to a drop in the volume of imported soybeans, causing the supply of soymeal in the country to shrink. Therefore, we predict that there is little room for prices of soymeal to fall.