August 29, 2003
China's Soyoil to Gain Next Week Amidst Soybean Supply Concerns
After steadily rising in the past week, Chinese soyoil prices will likely gain further next week, bolstered by concerns of limited soybean supplies, trade participants said Friday.
Expectations of increased domestic soyoil demand will also help to boost prices, they said.
"There's room (for prices) to go up some more because soybeans are still facing some import uncertainty," said a Shanghai-based analyst with a Chinese edible oils trading company.
China meets nearly half it soybean demand through imports and imports have been disrupted in recent months because of stricter quarantine rules, which many allege are an excuse to limit imports ahead of the domestic crushing season.
Although the government allowed several soybean cargoes to be unloaded in recent weeks, more cargoes are reported to be stranded for want of quarantine certificates.
The Chinese government has also raised concerns of contaminated soybean cargoes, fuelling fears of a limited import ban on select trading companies.
China has been accused of trying to limit imports to help its own farmers by boosting domestic prices ahead of the local harvest in September.
However, Chinese Agricultural Minister Du Qinglin said during a visit to the Chicago Board of Trade Thursday that there are no limits on soybean imports into China and that he hoped for progress in trade talks.
"As long as soybean trading companies can comply with the requirements that we have outlined, things will be resolved very quickly," Du said.
But trade participants said the market still faces the possibility of lower soybean imports in the coming months.
In the first seven months of 2003, China imported 12.27 million tons of soybeans, up 147% on year, more than total imports in the whole of 2002 at 11.3 million tons.
Soybean imports will be larger this year, in response to an expanded crushing industry, but soyoil demand is also seen higher because of an increasingly affluent population.
"We won't be seeing a (fall) in (soyoil) prices. It's psychological. People are thinking about lower soybean supplies," said an oilseed manager at an international commodities house in Beijing.
Friday, grade 2 soyoil in the central-eastern provinces of Henan, Jiangsu and Shandong provinces were quoted 50 yuan ($1=CNY8.28) to CNY100 a ton higher on the week.
In Jiangsu province, grade 2 soyoil was quoted around CNY5,750/ton, ex- factory Friday. In Henan and Shandong provinces, offers were CNY5,840/ton and CNY5,800/ton, respectively.
In Southern Guangdong province, grade 2 soyoil was offered at CNY5,600- CNY5,650/ton, up around CNY50/ton on the week.
Higher Soyoil Demand Likely During Festivals, Winter Months
Soyoil prices also rose on the firmer tone on the international edible oils market, said some participants.
"That's one of the reasons. The firm MDEX palm oil market and firm CBOT soyoil market helped" Chinese soyoil prices, said a Beijing-based official with a Hong Kong oilseed company.
Crude palm oil futures on the Malaysia Derivatives Exchange ended in positive territory for three straight days, with the recovery fuelled by short covering and technical buying following the strong performance of the soyoil futures at the Chicago Board of Trade. At 0900 GMT, the benchmark November CPO contract was at 1,333 ringgit ($1=MYR3.8) a ton, down MYR3 from Thursday's close on profit taking ahead of the weekend.
CBOT December soyoil settled 27 points higher at 20.33 U.S. cents a pound Thursday, partly on concerns of deficient rainfall in parts of the U.S. soybean belt.
Some Chinese traders, however, said higher domestic demand for soyoil anticipated in the coming festival months has played a bigger role in buoying Chinese prices, and this will continue to exert upward pressure on the market.
This will happen despite more soyoil imports expected, said participants.
"The holidays are coming so oil consumption will be up. But at the same time, people aren't so keen to sell because they are thinking of the import situation and fear some disruption to supplies," said the oilseed manager with the global trading firm.
China will observe the Mid-Autumn or Moon Festival in mid-September, followed by the week-long National Day celebrations in early October.
With the winter months approaching, manufacturers have also started using less palm oil for blending with soyoil, said participants. Palm oil tends to become solid in colder temperatures, making it a less preferred cooking medium in the winter months.