December 18, 2009


Asia Grain Outlook on Friday: China's homegrown soy become attractive



China's local-grown soy have become more competitive in prices due to government subsidies, providing an alternative to crushers in the event of import prices remaining high, according to traders and analysts.


The China National Grain & Oils Information Center estimated the CNF price of January arrivals at CNY3,970 a metric tonne, indicating a very limited price gap with domestic beans.


Cash prices in China's largest-growing region, the Heilongjiang province, are mostly near CNY3,800/tonne now; processors who buy local beans are eligible for a subsidy of CNY160/tonne.


The prices are higher than the government-set floor price of CNY3,740/tonne, after slow sales by farmers led to crushers hiking their prices.


"If you add the transport fees, and consider the difference in oil content, the crushers located in the country's coastal areas should see local beans almost as competitive as imports," said an analyst at a commodities consultancy in Shanghai.


For crushers in the country's northeast, local beans could be even cheaper, the analyst added.


As the U.S. currently has no competition in the soy export market, import prices aren't likely to fall much before the South American crop's condition is known, according to the CNGOIC. "This will be good for the sales of domestic beans."


China bought large amounts of domestic soy from last year's harvest for state reserves, but crushers turned away from state stock releases earlier this year since they were more expensive than imports.


In the meantime, healthy demand for soymeal and soyoil on the back of pre-Chinese New Year stockpiling is supporting prices, in turn underpinning soy demand.


CNGOIC also estimated soyoil imports in the first quarter next year will slump to a total of 170,000 metric tonnes, compared with a total of 400,000 tonnes in November-December, due to limited supply from South America.


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