November 19, 2008

Himfr.com, one of China's B2B search platforms, analyzed that amid a global economic downturn, the China soy market will remain stable with prices standing above RMB 3.6 per kilogramme towards the end of this year.

According to market analysts of Himfr.com, to protect its huge agricultural economy, the Chinese government have sought to stabilize prices and increase incentive in growing grains by adopting measures at all levels, including the purchase of 1.5 million tonnes through the Nation Grain Storage in the North East at RMB 3,700 per tonne, which effectively curbed the falling prices of soy in North eastern China.The government is likely to raise tariffs on its food imports and will introduce other policies to stabilize grain prices through domestic grain market regulations.

Worldwide food prices are likely to remain at current levels with governments taking measures and injecting huge sums of capital to the global economy in the face of an upcoming recession, with UK launching a GBP 3.7 billion plan, the US more than US$ 70 billion, Germany a EUR 500 billion package, and the Chinese government at least RMB 7 billion to help their economies, according to the analysts.

With international crude oil falling below US$ 65 a barrel and the fall in the volume of international sea freight, the current price of soy arriving Chinese ports is RMB 3,600 per tonne. If China decides to raise tariffs on imported soy, then the price of imported soy will be higher than current domestic soy prices.

With the Heilongjiang soy oil companies gradually commencing production, soy purchase price is pushed up to RMB 3.7 per kilogramme, and individual's grain purchase price have also increased to RMB 3.6 per kilogramme. The increase in purchase price is a more vigorous support of soy prices' upward trend.

From the above-mentioned factors, analysts predict that before December 2008, prices of the Chinese domestic soy will remain stable, unless new policies are introduced. Himfr.com expects that soy prices come will not come under market influence again until February 2009.

1 RMB=US$0.1464 (Nov 19, 2008)