November 22, 2011


China's state soy imports rile domestic buyers


Chinese government's imports of soy for state reserves, which have pushed up Chicago Board of Trade (CBOT) prices, have angered some commercial soy buyers at home, according to a media report.

Sinograin, which manages state reserves, has since October purchased twice from the US, buying about 1.2 million tonnes. Its latest purchases pushed up CBOT prices 2% on November 16.


"After price inquires by Sinograin, world soy prices have rallied, which led to losses for Chinese companies in their normal purchases," said a trading executive with a state-owned trading house.


Because Sinograin's purchases on the world market were considered a secret, companies such as COFCO, China Textile Grains and Oils, despite being owned by the government, were "the last to be informed," the executive added.


The decision to buy soy overseas for state reserves was made jointly by the State Grain Administration and the National Development and Reform Commission (NDRC), the report said.


Beijing has since 2008 built up imported soy reserves of between two to three million tonnes, which it rotates every year. It was not clear if the reserve volume had been expanded this year amid a 10% reduction in the domestic soy harvest.


China buys about 60% of global soy trade.


Reserves of state domestic soy have been unpopular among crushers, which process soy into soymeal and cooking oil, due to lower oil content.


The company has proposed to NDRC that four state-owned companies - Sinograin, COFCO, China Textile as well as China Grain - be involved in state reserve purchases, but no progress on the proposal had been made, the executive said.


Sinograin has also been buying US corn this year. Its latest purchase in early October drove Chicago prices up more than 6% on October 12.


Besides its state stockpiling function, Sinograin also runs its own crushers for commercial production. It recently established a new facility in the city of Tianjin, with annual capacity to process 1.5 million tonnes of soy and refine 450,000 tonnes of crude soyoil.

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