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China oilseeds: Buying binge may take pause

SHANGHAI: Chinese buying of soyabeans and canola seeds is likely to take a breather because of a looming risk that imported supplies could flood a fragile domestic market, traders said on Tuesday.

"If 200,000 to 300,000 tonnes get unloaded back-to-back at one port, local prices could crash at a time when seasonal demand is sluggish," said one.

China is reported to have bought about one million tonnes of soyabeans in recent weeks, fuelling a rally of soyabeans futures on the Chicago Board of Trade.

While Chinese importers were planning more purchases, prices were approaching the up-limit of $220 per tonne, the trader said.

"There would be buyers between $215 and $220," he said, referring to the prices at which recent deals had been made.

"But if prices rise above $220, the margin becomes too thin for the risk."

He estimated the net profit margin for March shipment was $5 to $6 per tonne

HIGHER IMPORTS FORESEEN

Industry sources had forecast larger imports this year because last year's domestic harvest was not only smaller than the previous year's but poor in quality as the crop contained many green beans with high water content.

In addition, they had said feed mills were running low on soya meal after China slapped a value-added tax on soyameal imports last year.

In 1999, China's soya meal imports fell 85 percent to 571,821 tonnes, while soyabeans imports rose 36.2 percent to 4.32 million tonnes.

"Many feeds mills were scrambling for supplies that sent prices up by more than 10 percent since the start of the year," the trader said.

Chinese soyameal is now offered at around 2,050 yuan per tonne.

Chinese importers had contracted two or three small shipments of Indian soyameal, which foreign trading sources said were done at $202 to $203 per tonne, cif China,.

"Indian soyameal comes in small sizes and quick delivery," a Chinese trader said.

Hardly any importer would be willing to buy large sizes and wait for long shipment from the United States or South America, he said.

The wariness stemmed from unclear demand for compound feeds in the months after the Chinese New Year holiday earlier in February, which was traditionally the slow demand period because the weather was still too cold for breeding, traders said.

"Feed mills want to keep enough stocks for seven to 10 days. Beyond that, they cannot afford it," another trader said.

RAPESEED BUYING SPURRED

The trader said China's recent buying of rapeseed was also spurred by demand for rapeseed meal for making compound feed.

Like soyabeans, rapeseed purchases would also be price-sensitive, with importers willing to consider deals below $220 per tonne, traders said.

"We expect oilseeds demand to remain firm through April," one trader said. "After that it becomes very questionable."

He said the soyabean planting acreage was expected to rise this year in the United States, the world's largest producer.

China bought 2.44 million tonnes of US soyabeans in 1999, accounting for 57 percent of China's total soyabean imports last year. -Reuters