August 28, 2003



China Soymeal Market under Pressure amidst Increased Soybean Supply


With the threat of any disruption in soybean imports receding in recent weeks, Chinese soymeal prices are unlikely to regain the earlier upward momentum any time soon, traders and analysts said Thursday.


"The key is the amount of imported soybeans. Since many cargoes finally get the permit to unload, increased supply will pressure the markets lower in the coming weeks," a trader from a Hong Kong-based oilseeds company said.


In the marketing year ending Sept. 30 2003, China's soymeal output is projected to be 19.93 million tons, up 4.23 million tons from production in the previous year, local traders said, citing the latest forecast from a semi- official grain think-tank.


Demand, however, is estimated to be only 18.40 million tons, up 1.27 million tons from demand last year.


China's soymeal output in the 2003-04 marketing year is estimated to rise further to a record 21.50 million tons while demand is expected to be even higher at 21.58 million tons, also a new record, the think-tank has said, according to traders.


Both in August and in September, about 2.00 million to 2.20 million tons each of imported soybeans are expected to arrive at ports in China despite efforts of China's quarantine authorities to slow down the pace of import by raising the quality issues, traders said.


Amid such high arrivals and in anticipation of more next month, the domestic soymeal market has already lost steam and looks set to remain so well into September, they said.


"The (soymeal) market needs a breather after the rally in the past months, as recent unloading of stranded cargoes helped ease immediate concerns among crushers about raw material shortages," an analyst from China National Cereals Oils and Foodstuff Import & Export Corp, or COFCO said.


Thursday, soymeal in China's eastern Shandong province was quoted around 2,150 yuan to 2,200 yuan ($1= CNY8.277) a metric ton, compared with CNY2,200/ton last week.


In Dalian, Liaoning province, prices quoted by local crushers were lower by about CNY40/ton to CNY60/ton around CNY2,100/ton to CNY2,140/ton. Local traders reported transaction at CNY2,100/ton.


In Guangdong province, Southern China, soymeal prices fell by CNY40- CNY80/ton in the past week to CNY2,200-CNY2,220/ton, mainly on improved supply of soybeans, local traders said.


Three crushers in Dongguan, Guangdong have resumed crush operations about two weeks ago, after some stranded soy cargoes unloaded. One large crusher in Jiangsu province also resumed crushing after two cargoes of soybeans got unloaded last week, the trader from the Hong Kong-based oilseeds company said.


Through July and most of August, China's soymeal markets have been firm as local crushers reduced crushing or idled their facilities amid concerns about higher cost of imported soybeans and disruption to imports in coming months.


The reluctance of some large crushers to lower soymeal prices in an attempt to shore up crush margin despite weaker soyoil prices, also kept the soymeal market firm, traders said.


Since late July, dozens of imported soybeans cargoes had to wait days and even weeks before getting the quarantine permit from China General Administration of Quality Supervision, Inspection and Quarantine, or AQSIQ, the de-facto government agency monitoring soybean imports.