October 3, 2011

 

China's soy prices advance amid worsened crop outlook
 

 

Soy prices in China's major producing areas rose in the week to Friday (Sep 30), as crushers and traders raised purchase prices amid a sharp decline in domestic production.

 

However, trade was thin as farmers were reluctant to sell in expectation of higher prices.

 

Prices in Heilongjiang, Jilin and Liaoning, the top soy producing areas that account for more than half of China's total output, were RMB4,060-4,140 (US$636-648)/tonne, compared with RMB3,950-4,000 (US$619-626)/tonne a week earlier.

 

Output in Heilongjiang, which accounts for about 40% of China's total, is expected to fall this year by 17% to 4.85 million tonnes, the state-backed China National Grain & Oils Information Centre said in a report Thursday. The centre earlier expected China's 2011 output to fall 11% to 13.5 million tonnes.

 

Farmers are waiting for the government to announce the new-crop soy purchase price, traders said.

 

Last year, the government set the price at RMB3,800 (US$595)/tonne - slightly higher than the market price then - to replenish state reserves and encourage domestic production.

 

Market participants expect China to raise the price to RMB4,200 (US$658)/tonne this year.

 

In the past 12 months, corn prices have risen about 30% while soy prices have increased only around 7% due to huge imports and state curbs on edible oil prices.

 

The depressed market, combined with a much lower unit yield than major exporting nations, led many farmers to switch from soy to corn.

 

In the week to September 22, China booked 846,000 tonnes of US soy to take advantage of recent low Chicago Board Of Trade prices, compared with 176,000 tonnes in the week ending September 15 and 112,700 tonnes a week earlier, the USDA said in its weekly report.