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Chinese soy crushers set to add to ballooning soyoil inventories


Soyoil inventories in China look set to build up further from already-high levels, denting prices even more, as the world’s largest soybean crushing sector cranks back up following coronavirus-led cutbacks last month, traders and analysts said.


China’s stocks of soybean oil have climbed 50% this year as edible oil consumption slowed while millions of people stayed home instead of eating at canteens and restaurants due to the epidemic.


But those inventories - 1.344m tonnes as of March 3 and around 30% above the seasonal average since 2015 - look set to swell further as soybean processing recovers though demand is still expected to remain sluggish, according to agriculture consultancy Cofeed.


"It is very likely that soybean oil inventories will rise above 1.4m by end of March," said Tang Jia, analyst with Cofeed.


"Chinese buyers keep buying beans from South America as crush margins are decent, and demand won’t pick up significantly before the disease gets fully under control," Tang said.


China is the world’s top soybean buyer and crushes the oilseed to make soymeal for its massive livestock sector and for cooking oil.


Rising soyoil stocks will apply fresh pressure to prices that have already lost around 15% so far in 2020.


"Weekly demand for soyoil in the second and third week after the (extended) holiday was around 150,000 to 160,000 tonnes, almost halved from levels in previous years," said Xiang Bo, analyst with Zheshang futures.


Daily soyoil sales by crushers has averaged around 10,000 tonnes as a result, well below the normal rate of over 30,000 tonnes, according to Cofeed.


Soyoil stocks might reach 1.65m tonnes near end of March, on precondition that demand can largely resume by then, according to Xiang, the analyst.


Despite weak demand for soyoil, soybean processors are expected to boost crushing levels to replenish soymeal inventories.


Soybean crushing, which came to a near halt at the peak of the virus clampdown, has recovered to around 50% since and will climb further as more plants restart.


"Soyoil inventories will further rise," said a manager with a crusher in southern China.


His plant is currently running only one of its three production lines, each with a daily capacity of 4,000 tonnes, but is preparing to increase output as virus containment measures ease and food consumption rises.


China’s national soymeal stocks are at 471,400 tonnes – one-third lower than normal for this time of year.


Crushers at major processing hub Rizhao in eastern Shandong province can make 160 yuan ($23.05) from every tonne of soybeans processed, the highest for the time of the year in five years.


"As long as there are beans, the plants will crush," said Yang Xiaohe, analyst with Funder Securities, noting a delay of Brazilian soy deliveries that might slow the rise in soyoil inventories this month.


"But (any) production cuts cannot offset the impact from almost halted consumption. Soyoil stocks will still increase, just maybe at a slower pace."

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