October 17, 2008


China soy prices on a decline; buyers on sidelines


Soy prices in China's major producing regions remained on a downward trend in the week to Friday under the weight of hefty losses in Chicago Board of Trade soy futures and freight rates, while buyers stood on the sidelines, said traders and analysts.


Soy prices in Heilongjiang province, a major production base in the northeast, fell to around RMB3, 300 a tonne, from RMB3, 400/tonne a week ago.


Trading was not active as crushers and traders were reluctant to buy due to expectations that prices will continue to fall amidst bearish sentiment in the overall commodities market said analysts.


An analyst in Beijing said prices of imports scheduled to arrive in China in November are around CNY3, 200/tonne and it is unusual that domestic cash prices are higher than imports. So it is quite certain that domestic cash values will go down further, even if CBOT prices become relatively stable.


Traders estimate that farmers' production costs are around RMB2, 800-RMB3, 200/tonne, so if prices continue to fall, some of them will suffer losses.


Meanwhile, China's government has not yet issued formal notices regarding the possible purchase of about 1 million tonnes of new crop beans in the northeast to support prices, despite market talk, said a person familiar with the situation.


Soy oil and soymeal prices were also lower in the week to Friday, along with the decline in soy prices.


First-grade soy oil prices in Guangdong province have fallen to RMB6, 700-RMB6, 900/tonne, from RMB7, 400-RMB8, 200/tonne last week.


Soymeal prices in China's coastal regions have dropped to RMB3, 200-RMB3, 300/tonne this week from RMB3, 400-RMB3, 450/tonne last week.


Analysts said downstream demand is very weak, especially with some high-cost pig raisers suffering losses, so current soy prices are not fundamentally supported despite the recent declines.


US$1 = RMB$6.83 (November 14, 2008)

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