November 10, 2008


China soy oil, soy markets strong amid strong demand


In the face of lower inventories, China's soy oil market became bullish for the first time in months. 


That is according to a survey done by the official China National Grain and Oils Information Centre (CNGOIC).


It said soymeal stayed weak as feed demand was affected by the melamine-tainted feed scandal.


Even so, China's imports of soybeans remained strong after government buys in the northeast helped prop up domestic prices over U.S soy price levels.


The centre said crushers are expected to increase purchases overseas in the coming weeks while imports are expected to stay at a high level.


Soy oil supplies in some areas became tight. Merchants have begun to build on their low stocks, which could spur further demand in coming weeks, it said.


The melamine-tainted feed scandal had pulled down Dalian meal futures prices but physical prices remained largely unchanged since crushers have not cut their prices.


Sales and prices of poultry products have been plummeting recently after melamine was discovered in some chicken eggs that apparently was caused by melamine-tainted feed.


The government was likely to begin its corn purchases in the middle of the month in the northeast, which would support prices there. Processors and traders were taking a wait and see attitude, checking where prices would go before they enter the market in December to buy.


Meanwhile, corn prices elsewhere were seen weak as more processors were closed and the scandal also hit corn demand.


The outlook for short-grain rice stayed bullish with the support of government purchases and subsidies on transport out of major growing areas.


The wheat market weakened this week as food manufacturers bought less flour.

The centre gave the following index data.


                    Nov 5               Oct 29            Oct 22

 Soybean        53.1                52.5               48.8

 Soymeal        47.5                52.0               49.0

 Soyoil            54.2                49.2               47.5

 Corn              44.8                43.6               42.9

 Wheat            52.4                52.9               52.4

 Rice               55.0                55.0               56.9


A reading below 50.0 indicates participants are bearish, a reading of 50.0 indicates they are neutral and a reading above 50.0 indicates they are bullish.



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