November 30, 2011


China's soy import demand shows signs of recovery


China's Ministry of Commerce (MOC) predicted that China would import 5.63 million tonnes of soy in November, a jump of 48% over the previous month and up 2.8% on-year, indicating that the country's soy import demand is picking up.


Affected by edible oil crushers' losses as well as the government's sales of reserves to add market supply, China's soy imports fell for three months in a row after hitting a high point of 5.35 million tonnes in July of this year.


In the first 10 months of this year, the country imported 41.5 million tonnes of soy, down 5.42% on-year. The imports in the November to December period, the peak marketing season of the US soy, were projected to recover as crushing mills' profitability has improved, analysts said.


In September, spot prices of soymeal and soyoil started to rise and this helped reduce losses of oil crushing mills which in turn began to increase imports.


There are roughly four factors behind the expectation for high soy import in November, analysts said.


First, China's Spring Festival holiday in 2012 comes earlier than the preceding year, which will lead to start-up of holiday restocking in advance.


Second, it's the traditional peak season for soy and cooking oil consumption in the fourth quarter, and demand usually maintains at a high level in that period.


Third, the state stockpiler China Grain Reserves Corporation purchased 500,000 tonnes of soy in November, making a contribution to the monthly imports. Fourth, some traders made bargain purchases to replenish stocks as international soy prices had slumped recently.


However, although Chinese demand showed signs of recovery, CBOT soy just rebounded moderately before tumbling into a downward channel again as the rise in demand was still below the expectations at the beginning of this year.


Meanwhile, anticipation for higher South American soy output, as well as Europe debt crisis and worsening outlook for global economy also pressed down soy and edible oil markets.


Soy futures on Dalian Commodity Exchange might maintain weak trading and even decline in the coming weeks, analysts said.


In the long run, the factors that can change the weak trend of soy and edible oil include persistently good outlook for China's demand, La Nina weather's negative impact on soy planting in South America, relaxation of domestic monetary policy and alleviation of Europe debt crisis, experts concluded.

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