September 23, 2003
China Prices Soar On Tight Soymeal Supply
Prices continued to hit record levels in China's domestic soymeal markets in the past week, as concerns mount over tighter supply of imported soybeans and a poor local harvest this year, local traders and analysts said.
Strong demand from the livestock and feedstuff industries also played a role in the rally of the soymeal markets. "The soymeal markets are on fire now as people are concerned about soybean supply in the coming months. The local soybean harvest hasn't begun, but crop tours conducted by some private companies showed the average yield will be sharply lower than last year," said a trader from a Hong Kong- based oilseeds company.
As of Monday, prices quoted for soymeal in Jiangsu province, eastern China, were 2,480 yuan ($1=CNY8.28) a metric ton, the highest level so far this year, compared with CNY2,300/ton about 10 days ago, local traders said.
In Shandong province, north of Jiangsu, soymeal prices also jumped to around CNY2,380-CNY2,450/ton Monday, compared with CNY2,300/ton about 10 days ago.
China's soybean production in the 2003-04 marketing year, which runs from October-September, is forecast around 16.6 million tons, according to the U.S. Department of Agriculture's September report.
China produced 16.51 million tons of soybeans in 2002-03, according to official data. But Chinese traders said soybean output this year could be sharply lower than earlier forecasts due to bad weather and early frost, especially in Heilongjiang, the top soybean producing province.
"In Heilongjiang, the crop prospect is very poor this year due to drought earlier in the growing season which was followed by overly wet conditions. The early frost also contributed to the declining yield. Production in Heilongjiang will be severely hit this year," a trader from a soybean trading company in Heilongjiang said.
China's soybean production is forecast around only 16.3 million tons in the 2003-04 marketing year, traders said Monday, citing the latest data from a government-backed grain think tank.
Soybean Imports In 2003 Put At 19 Million Tons
The prospect of lower soybean imports in the coming months also helped to fuel the rally in soymeal as many crushers in Southern China depend on imported supplies to maintain their crush operations.
In August, China's soybean imports were up 89% on year at 2,454,395 tons, bringing total imports in the first eight months of 2003 to 14,722,010 tons, up 139% on year.
But soybean imports for the rest of 2003 could be much lower as several traders believe the Chinese government will work to curb imports during the local harvest season to shore up domestic prices.
China's 2003 soybean imports are forecast to hit a record high of 19 million tons, 7.69 million tons more than imports in 2002, Chinese traders said, citing data from the Chinese grain think tank.
The same think tank forecasts soybean imports from October 2002 to September 2003 will reach 20 million tons, traders said. "If such forecasts are realized, the average monthly import in the last four months of 2003 will slow down to a little more than 1 million tons, far below the average monthly import of 2.1 million tons in the first eight months of 2003," a grain market analyst from a local brokerage house in Dalian said.
Although imports this year will be higher than last year, not all crushers have enough supplies as crushing capacities have also expanded.
China's soybean imports could pick up again after the local harvest, traders said, as local crushers have to rely on imported soybeans to meet demand. But the timing and amount of imports will be largely in the hands of the government, said traders.
If this happens, soybean crushers will need to stock up enough in preparation for a potential supply squeeze in the coming season, traders said. "The fact is, imported soybeans aren't evenly distributed among crushers. Some crushers might have enough supplies, but others have to scramble to find supplies or face shortage. That's why imported soybean prices have been firming up in the past week," said a trader from the state-owned China National Cereals, Oils & Foodstuffs Import & Export Corp.
In the past week ending Monday, prices of imported soybeans at Chinese ports firmed up the nation, with quotes around CNY2,690-CNY2,700/ton, compared with CNY2,640/ton one week ago.
The soymeal markets also got a boost from strong demand from local feedstuff producers who were driven by the surging prices in the local livestock markets in eastern and southern China, traders added.
