November 14, 2008

China to procure 1.5 million tonnes of soy


China is buying at least 1.5 million tonnes of soy from local farmers, boosting rural incomes after much of the main producing region's harvest went unsold.


While the state reserve has already acquired about 500,000 tonnes, other buyers and local crushers have imported cheaper soy. The 1.5 million tonnes, worth RMB5.6 billion (US$820 million), represents about 9 percent of the domestic crop.


Further purchases may boost China's imports as the reserve absorbs domestic supply. China said on October 20 that it would buy local soy to help farmers prevent losses after prices plunged. Dalian futures have dropped 39 percent from a record on July 3. The government didn't publicly announce its target volume.


The government would pay RMB3,700 per tonne for soy and RMB1,500 for corn in northeastern China, according to the National Development and Reform Commission.


Soy for May delivery on the Dalian Commodity Exchange fell RMB59, or 1.8 percent, to RMB3,205 per tonne. Futures have dropped from a record RMB5,241.


Prices of soy exported to northeastern China, the biggest producing region, are as low as RMB3,100 per tonne, compared with locally produced soy at about RMB3,850 per tonne, said Nie Ben, manager at Shanghai Continent Futures Co. in Dalian.


Officials are also considering raising the import tax on soy from the current 3 percent to reduce the appeal of overseas supplies.


State purchases of soy at above-market prices are necessary to stem an income disparity between rural and urban areas and prevent social unrest by aiding the farmers during harvesting and selling of the new crops.


China's output may rise 30 percent to 16.5 million tonnes this year from 12.7 million a year earlier, according to the China National Grain and Oils Information Center.

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