Soybean glut to hit China crush margins, may dent U.S. orders

Business & Markets 2013
Written by Reuters
Wednesday, 08 May 2013 16:50
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BEIJING/SINGAPORE (May 8): China, the world's fourth-largest soy
producer and biggest buyer, expects record bean imports in May-July
even as a latest bird flu outbreak cuts demand for the feed crop,
pressuring crush margins and potentially triggering cargo cancellations.
A triple whammy of surging imports, sluggish demand and weak
processing margins is also likely to weigh on China's orders for U.S. soy
when the new marketing season gets underway in September, industry
sources and analysts said.
Cargo cancellations by Chinese processors and lower demand could
depress global prices which have risen 8 percent in the past month
underpinned by tight old-crop supplies and slow farmer selling in the
United States.
Shipments from Brazil, expected to overtake the United States as the world's top producer this year, were hit by severe port
congestion earlier this year, but loadings have been stepped up and exports last month were at near-record levels.
The arrival of those delayed cargoes as well as normal bookings is set to push total imports to China - which buys more than
60 percent of all globally-traded soybeans - to nearly 19 million tonnes in May-July, up 13 percent from the same period last
year, according to trade and analysts' estimates. For January-March, China's soybean imports fell 13.4 percent from last
year to 11.5 million tonnes.
"Crushing margins have been positive so far but we expect them to fall or even turn negative when the tsunami of beans hits
China in June and July," said a Singapore-based trading manager at a company which runs processing plants in China.
"Imports could reach 6 million tonnes in June and up to 7 million in July," the manager added.
Imports this month are seen climbing to 5.6 million tonnes, according to the China National Grain and Oils Information Centre,
an official think-tank, from below 4 million tonnes in April. China's record imports were 6.2 million tonnes in June 2010.
Expectations for a glut of cheap imports and an oversupply of soybeans have already prompted Wilmar International Ltd and
COFCO-owned China Agri-industries to cut soyoil prices for retailers by about 15 percent, local media have reported.