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|Chinese soy imports hit record high - despite crushers' woes
By Jamie Day - Published 08/05/2017
Chinese soybean imports extended their record start to 2017, despite a slip by crushers into a loss, with the extent of purchases seen as boding well for prices of the oilseed.
China imported 8.02 million tons of soybeans last month – a rise of 13.4% year on year, and indeed a record for April, customs data showed.
The figure represented a fourth consecutive month when imports have set a record for the month, with total volumes for 2017 for the period up 18% year on year.
And buy-ins are seen remaining strong for May and June too, at some 8m-9m tonnes a month, demand that Commerzbank said offered hope for soybean bulls, who have seen Chicago soybean futures recover somewhat after hitting a one-year low last month.
'Support the price'
"Imports are expected to grow further over the next few months as China's demand for soybeans to produce animal feed and edible oil remains unabated," the bank said.
"The continuing robust demand – especially from China, which accounts for over 60% of global imports – is likely to support the soybean price."
The buoyancy in imports reflects the feed needs of the country's huge and growing pig industry. Indeed, Cofco, the state-owned ag giant, said that it intended by 2020 to hike by 2m hogs, to 5m hogs, its production capacity.
Nonetheless, thanks to industry overcapacity, China's oilseed crushers have been running at negative margins for two months.
'Positive for demand'
Margins, which hit negative 251 yuan per tonne of imported soybeans in late April, are currently a negative 211 yuan per tonne for processors in the province of Shangdong, according to Reuters data.
However, Chinese plans in July to cut VAT on imported soybeans by 2 points to 11% are seen as a boost to margins ahead.
"China's decision to adjust their VAT from 13% to 11% is viewed as a life line to struggling crushers," said US broker Benson Quinn Commodities.
"Longer term it is a positive for Chinese soybean demand."
Chinese farmers switch to soy
The growth in demand is fuelling domestic growth in soybean production too, as highlighted by separate data from China's National Grain and Oils Information Centre showing that the country will expand production of the oilseed this year by 9.2% to 14.3m tonnes.
These estimates assume a 10.5% increase in the soybean area to 7.9m hectares, and respective 2.7% and 3.1% cuts in the corn and rapeseed crop areas to 35.4m and 6.88m hectares.
The centre predicts that China's domestic corn production will drop by 3.7% to 211.5m tonnes, as a change in subsidies continued to reduce the appeal to farmers of growing the grain.
The rapeseed harvested was pegged 1.9% lower at 13.7m tonnes.
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