September 1, 2003

 

 

China's Soymeal Market Weekly Report: Soymeal Prices in China Fell Amidst Increase in Soy Bean Supply

 

An eFeedLink Exclusive Report

 

Soymeal prices across the whole of China fell considerably as a result of an increase in soy bean supply arising from the gradual offloading of the crop which was previously held up at the ports and subsequently transported to factories. Prices of medium grade soymeal as at  August 29 were as follows: 

    • Ex-warehouse prices in Heilongjiang province fell RMB70-120/ton from the previous week to RMB2060-2150/ton;
    • Ex-warehouse prices in Jilin province's Changchun city fell RMB60/ton from the previous week to RMB2140/ton;
    • Average ex-warehouse prices in Liaoning province's Dalian city and Dalian port fell RMB80/ton from the previous week to RMB2100/ton and RMB2130/ton respectively; 
    • Ex-warehouse prices in the Jingjin and Shijiazhuang regions fell RMB70/ton from the previous week to RMB2180-2190/ton;
    • Ex-warehouse prices in the Shandong region fell RMB40-50/ton from the previous week to RMB2170-2180; 
    • Ex-warehouse prices in the Henan province remained unchanged from the previous week at RMB2230-2250/ton;
    • Ex-warehouse prices in the Jiangsu and Zhejiang regions fell RMB30-40/ton from the previous week to RMB2230/ton; 
    • Delivered-to-factory prices in the Shanghai region fell RMB50/ton from the previous week to RMB2250/ton; 
    • Delivered-to-factory prices in Hubei and Hunan provinces fell RMB80/ton from the previous week to RMB2240/ton;
    • Delivered-to-factory prices in central Sichuan province fell RMB60/ton from the previous week to RMB2260/ton; 
    • Delivery prices in Fujian and Guangdong ports fell RMB60/ton from the pervious week to RMB2200;
    • Delivery prices in certain Guangxi ports rose RMB20/ton from the previous week to RMB2280/ton while others fell RMB20/ton to RMB2240/ton.  

The market is paying closer attention to the quantity and quality of the new crop of soy bean which will enter the market shortly. The growth of soy beans at the Heilongjiang region has been delayed by droughts and floods, which have caused a corresponding drop in quality. There are signs that winter could arrive early as well, which is a further detriment to the growth of soy beans there. Therefore, there is little cause for optimism in terms of the quality and quantity of soy beans produced by China this year.

 

Supply of imported soy beans has increased dramatically for the short term mainly because of the rapid issuance of quality inspection certificates, accelerating the offloading of soy beans which were previously held up at the ports. This is expected to heap pressure on the soy bean market in the short term. However, with the approach of September 20 and the imminent implementation of the new regulations pertaining to genetically modified crops, some traders are adopting a cautious attitude to the policy; in addition, most are also adopting a wait-and-see attitude instead of carrying out large-scale acquisitions before US soy beans enter the market due to their concern as to whether the country would implement new measures aimed at limiting imports.

 

As a result, there still exist a possibility that supply of imported soy beans could be cut off after October. Despite the fact that by then, the quantity of soy bean entering the market in the country would be at its peak, the cut off in supply of imported soy beans would still bring much benefits, and would support the rise in soymeal prices again. However, China's Agriculture minister said that China has not imposed a ban on the import of foreign soy beans, but hoped that countries supplying genetically modified food would apply labels on their products. Industry watchers felt that this could be an indirect approach adopted by the country to allow consumers to choose products for themselves, thereby achieving its objective of managing the market.

 

The auction of the second batch of government-stored soy beans was successfully completed this week, the highest transacted price being RMB2500/ton, while the lowest transacted price was RMB2400/ton; total transacted volume was 260,000 tons, but this has not affected the market by much. With Japan importing chicken meat produced by China again, there exist the possibility that the consumption of  soymeal, which is the raw material for animal feed, could increase.

 

CBOT soy bean prices continued its strong showing this week due to the hot weather in the mid-western regions of the US. However, the market needed time to digest the continual rise in prices, and is waiting for new information before determining its course. The prices of Dalian's soy bean did not differ from last week's. The drastic fall in prices of monthly current stock agreement 309 has brought pressure to bear on other Dalian's agreements, fluctuating within its price bands. The prices of Dalian's soymeal continued to fall from a high at the beginning of the week, but the fall was quickly stopped, and there were much price adjustments before rebounding strongly at the weekend.

 

Overall, short term pressure on the prices of current domestic stock of soymeal still exist; this is not only the result of imported soy beans, but also include the imminent entry of newly-harvested soy bean into the market, and the drop in prices which soymeal purchasers are prepared to pay for. However, as uncertainty remains for the period after October, and that the volume of soymeal consumption could increase in future, the fall in soymeal prices is expected to be limited.