October 13, 2008


Few defaults result in support for China soy imports


Small Chinese crushers defaulted on one or two South American soy cargoes last week, but sliding freight costs have helped the world's largest importer avoid any major defaults, said traders on Friday, 10 October 2008.


They said a dive in the cost of shipping has made US soy imports the cheapest this year and has triggered buying interest in China.


One trader said there was only the default of one or two cargoes, not by the big players which dominate the industry.


At least one default involved the same crusher, based in the northern province of Shandong, which defaulted a US soy cargo in March, said traders.


The global financial crisis helped drag CBOT soy prices down to a 10-month low last week, when China was on a week-long holiday, before a brief pick-up this week.


One trader said buyers were getting active in buying and inquiring, however there are still those who are cautious.


Freight rates from the US were nearly half the highest level set this year, said traders. The Baltic Exchange sea freight index for shipping raw materials such as iron ore and grain has plummeted more than 70 percent from a lifetime high in May to its lowest level in more than two years.


The Chinese are buying actively these days; they have never seen such cheap prices this year said an industry analyst.


Traders estimated the US soy arriving in China were priced at about 3,400 RMB (US$498.6) per tonne, 10 percent cheaper than domestic soy, and crushers could still make money even though domestic prices of soy oil and soy meal were also falling.


Traders estimated China has bought more than 600,000 tonnes so far in October, but the amount was still lower than an average weekly import of more than 750,000 tonnes, according to calculations based on previous months in the year.


Another trader said food demand was holding up despite global market turmoil but noted that many buyers remained cautious.


Luke Chandler, senior commodity analyst at Rabobank in Sydney, said in a research note that soy prices were expected to remain near current levels but could pick up towards the end of the year or in early 2009.


Chandler wrote soy prices are still forecast to be resilient and endure the economic period due to the tight fundamentals of the market.


(US$1=RMB 6.819)

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