October 31, 2003



China Could Buy Record 9 Million MT US Soybeans

China could buy a record 9.00 million metric tons of soybeans from U.S. in the 2003-04 marketing year, driven by the unprecedented demand for oilseeds to feed its hungry crushing industry and insufficient local oilseeds supplies, local traders and analysts in China said Wednesday.


The 2003-04 marketing year runs from October to September.


That would compare with about 7.50 million tons of U.S. soybeans purchased in 2002-03.


The buying is expected despite the soaring Chicago Board of Trade soybean prices and record high freight rates between U.S. Gulf and Asia, local traders said.


"The voracious demand from crushers, lured by fat crush margins, is outweighing any other factors for the time being, including the rationing due to lower U.S. soybean crops," a trader from China National Cereals Oils and Foodstuff Import & Export Corp (COFCO) told OsterDowJones Wednesday.


In the 2003-04 marketing year, Chinese soybean imports are seen hitting a new record of 22.00 million tons, compared with 21.40 million tons in 2002-03, traders said, citing a figure from a government-backed grain think tank.


The crush margin for processing a ton of imported soybeans, bought a couple of months ago at the prices of 2,640 yuan ($1=CNY8.277) a ton, is pegged at over CNY1,000, a level not seen in recent memory, traders added.


So far in the 2003-04 marketing year, Chinese buyers have committed to purchase as much as 4.50 million to 5.00 million tons of U.S. soybeans, traders said, citing the figure from the grain think tank. This group estimates China's soybean crush usage to be 29 million tons, compared with 26.5 million tons in the previous season.


The disappointing oilseed output in China this season, coupled with the ever- increasing crush capacity is behind the recent buying spree of foreign soybeans, traders said.


China's soybean crush capacity has grown sharply, boosted by the strong demand for soymeal from livestock and feedstuff industry and for edible oils from consumers with higher income per capita. But China's oilseeds production is dwarfed by the stellar economic growth.


"Domestic supplies of oilseeds and products are insufficient to cover the booming demand, generating the strong momentum for oilseeds import," an analyst from a local brokerage in Beijing said. 


Traders in China added that the detrimental weather has hit hard the oil crops like soybeans, rapeseed and cottonseeds in 2003.


The cottonseed production this season, for instance, is forecast to be to be only 9.00 million tons, slightly higher than the level of 8.76 million in 2002-03, said analysts in China.




In October, about five cargoes of soybeans from the U.S. are expected to arrive at the ports in eastern and southern China, traders said. In November, about 18 to 20 cargoes of U.S. soybeans are expected to arrive at China.


The import pace is likely to accelerate from December, as importers can only sign deals after they get the import licenses from Chinese quarantine authorities. It takes at least 30 days for U.S. soybeans to be shipped to China, said the trader.


The first batch of new import licenses following new genetically modified organism interim measures were issued in the last 10 days of October, said the trader from COFCO Wednesday. Those new rules took effect after September 20.

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