September 25, 2003



Chinese Soybean Poor Harvest, Better Crop Outlook

Domestic Chinese soybean markets suffered heavy losses in the past week in most parts of China, especially the Northeast, amid concerns of looming harvest pressure and expectations of production surpassing earlier estimates, Chinese traders and analysts said Wednesday.


As of Wednesday, the procurement prices for locally-produced soybeans in Heilongjiang province, the top soybean producing region in China, were quoted around 2,240 yuan ($1=CNY8.28) to CNY2,280 a metric ton, about CNY160- CNY220/ton lower than prices one week ago.


In Jilin and Liaoning provinces, the prices of locally produced soybeans also lost CNY100-CNY200/ton in the past week, local traders said.


"The focus of the market has been on the coming harvest...There are quite different sets of production forecasts for this year's crop. Some say it could be lower than that of 2002, but it might not be as bad as expected," a trader from China National Cereals, Oils & Foodstuffs Import & Export Corp. said.


Earlier, a government-backed grain think tank, citing poor weather, forecast China's soybean production in the 2003-04 marketing year, which runs from October-September, around only 16.3 million metric tons, below the output of 16.51 million tons in 2002-03.


But many international agencies have so far stuck with a slightly higher estimate for China's soybean production, traders and analysts in China noted. In its September report, the U.S. Department of Agriculture maintained a production forecast of 16.6 million tons, close to the latest forecast made by the Hamburg-based industry newsletter, Oil World.


"The Chinese soybean crop suffered from dryness during the early phases of germination and some additional damage from detrimental weather apparently occurred in recent weeks. We still expect a recovery in this year's soybean crop to 16.5 million tons," said Oil World.


China's soybeans are sowed in April and May, and harvested in October.


Too Early To Say Crop Is Poor


More traders are now doubtful if the production will be 16.3 million tons. "16.30 million tons? Unless there was severe early frost in northeastern China...It's a little bit too conservative. Well, a lower production estimate could help procurement prices to stay firm," a trader from a Hong Kong-based oilseeds company said.


In 2003, China's soybean planting acreage is estimated to be 5% higher compared with that of 2002, a combined result of higher economic returns for farmers and government incentives given to soybean farmers.


Others also echoed the view that overall output might not be that bad. "It could be close to that of last year or even slightly higher. Until now, we've heard some independent reports about poor crop outlooks in Heilongjiang province, but in the other major producing regions, the picture is much less clear. It is simply too early to make such a pessimistic forecast," a grain market analyst from a local brokerage house in Dalian, Liaoning province said.


Soybean Imports 2003-04 Forecast At 22 Million Tons


Whatever the output, China's soybean output in 2003-04 is unlikely to meet the government's ambitious plan to boost local production and reduce dependence on imports, analysts said.


"It doesn't make much a difference if the output is higher or lower. The fact is the local production is far less than what the booming crushing industry now cries for. We can arrive at a safe conclusion that China has to loosen its grip on imports," the trader from COFCO said.


In 2003-04, China's soybean usage for crushing is forecast to be 29 million tons, while imports are expected to hit a record 22 million tons, traders said, citing the latest figures from the government-backed grain think tank.


By comparison, Oil World puts China's soybean usage for crushing at 27.6 million tons and imports at a new high of 20.2 million tons in the same period, traders said.


In 2002-03, China's soybean imports are estimated to be at least 20 million tons, local traders and analysts said Wednesday. In the first nine months of 2003, China's soybean imports are estimated to be slightly higher than 17 million tons, traders said, compared with an official figure of 11.32 million tons for 2002.