December 2, 2008

Major soy crushing plants in Heilongjiang province have halted operations and are considering imports for the first time.

 

State-owned Heilongjiang Jiusan Oil & Fat Co Ltd, based in the provincial capital of Harbin, said its 5,000-tonne per day plant was shut down.

 

Jiusan's general manager, Tian Renli, said that under the state stockpiling plan, Beijing was paying RMB 3,700 per tonne of soy, nearly RMB 1,000 per tonne higher than US soy prices.

 

He said that it has distorted the market balance and no crushers here can accept such expensive soy. Their products have to compete on the same market as crushers using cheap imports.

 

Traders said at least 1 crusher in the province has already bought imported soy, although it was unclear if the shipments had already arrived in the province.

 

Beijing said it will buy 1 million tonnes of soy in Heilongjiang as part of its stockpile plan, which is initially set at 1.5 million tonnes in an effort to shore up domestic prices and raise farmers' income. Traders expect Beijing to double the target to 3 million tonnes.

 

The rest of the stockpiling plan is aimed at other northern provinces, such as Jilin, Liaoning and Inner Mongolia. But crushers -- who usually crush domestic soy this season, have already shifted to imports as farmers were unwilling to sell at lower prices.

 

A major trader from Dalian revealed that imports from these areas are larger compared to previous years,

 

Crushers in the north of the country use about 5 million tonnes of domestic soy for crushing, almost a third of China's domestic production of 16.5 million tonnes this year.

 

Tian said farmers in the area had only managed to sell 5 percent of their harvest so far this year, compared with 50 percent at the same point last year, since the government stockpile plan was too small to absorb all the harvest.

 

Many crushers have expressed interest in imports, said Han Zhenghui, general manager of Heilongjiang Tianqi Futures Co Ltd, during an industry meeting with 15 local crushers last week.

 

Half of all US soy exports in the marketing year which begins in September have gone to China, compared with the normal one-third of sales, according to USDA figures released last week.

 

The industry has expressed concerns on cheap imports. The situation could lead many local crushers into trouble or even go bankrupt, while farmers may not benefit from the state buying, said Han added.

                       

US$1= RMB6.853 (Dec 2)