October 21, 2003

Chinese Feed Millers' Increasing Interest in Indian Soymeal

Chinese feedstuff producers are turning their eyes to foreign soymeal supplies as the prices in local markets soar, bolstered by scarce soymeal offers by crushers, traders and analysts in China said on Monday.

On Monday, the ex-factory prices of soymeal in eastern and northern China were quoted between 3,050-3,100 yuan ($1=CNY8.277) a metric ton, and in southern China, the soymeal prices were even higher at over CNY3,200 a ton, local traders said.

The prospect of limited domestic soybean supply, coupled with the lower production estimates in U.S., has resulted in a sharp rally of soybean complex in China.

"The soymeal markets are likely to stay firm as the soybean supply is going to be exhausted by the end of October, if no new U.S. cargoes arrive by then," a trader from a Hong Kong based oilseeds company said Monday.

The feedstuff producers have to increase forward coverage, despite the soaring soymeal prices, because there is no sign that soymeal supply will improve very soon.

The relatively cheap prices of foreign soymeal have made it an attractive option for Chinese feedstuff producers, traders said Monday.

"Some feedstuff producers are already inquiring for the Indian soymeals as the prices are much lower," said a second trader from China National Cereals Oils and Foodstuff Import & Export Corp., or Cofco, Monday.

INDIAN SOYMEAL EYED, SHIPMENT IN NOVEMBER

The prices of Indian soymeal were quoted around $260 a ton, C&F China, for shipment in November, said traders in China.

"Chinese buyers prefer to buy Indian-origin soymeal as they are non-GMO (genetically modified) products, and thus are not subject to lengthy application procedure for GMO import licenses from government," the trader from Hong Kong based oilseeds company said.

Some buyers in southern China already received approval from the government to import soymeal. Over the past week deals were booked to import three or four small cargoes, with the earliest shipment seen in southern China in early November, the trader added.

But traders and analysts are not sure if China will continue to buy large quantities of soymeal in the coming months.

"Theoretically, we should not have a shortage of soymeal, as the overall production in the whole season should be ample to cover the domestic demand.

The Chinese government might do something to rectify the current situation," an analyst from a local brokerage house in Shanghai said Monday, when asked about the possibility of any large-scale import of soymeal.

In 2003-04 marketing year (October-September), China soymeal production is forecast to be 22.37 million tons, compare with domestic usage of 21.47 million and export of 0.90 million, according to the October figure from the U.S. Department of Agriculture.