A glut of soy in China due to severe outbreaks of bird flu is likely to reduce demand for imports this summer from the world’s largest consumer, with reports of defaults on some cargoes already rattling markets.
China’s imports of soy, an important source of poultry and livestock feed, surged 33 per cent in the first quarter to 15.35m tonnes, customs data showed on Thursday.
March imports were a healthy 4.62m tonnes following even stronger imports in the first two months of the year – which have helped drive soyabean prices to an eight-month high above $15 a bushel this week. The surge in supply is expected to reduce demand for cargoes from North and South America over the next two quarters, however, and the price of forward month soyabeans fell 0.7 per cent on Thursday to $14.87 a bushel.
Coupled with unexpectedly weak demand as bird flu outbreaks destroyed poultry flocks in Shandong, Zhejiang and other provinces, China is now sitting on excess stocks of soy. Weak soy meal prices put stress on soy crushers. At current spot prices, a crusher processing soybeans into cooking oil and soy meal would lose about $100 for each tonne processed.
“The amounts of soy imports by China in January and February this year were huge, and that has pushed down the prices domestically. If crushers see little profit, they can transfer the soy to South Korea or Japan. This is a huge contrast to the situation in the early 2000s,” said Ma Wenfeng, of Beijing Orient Agribusiness Consultant Ltd.
Rumours of defaults by Chinese buyers bring back memories of 2004, when private crushers that had rushed to buy soy – driving up prices well beyond their ability to make money on crushing – then refused them, causing prices to crash. Thus far, the market impact of more limited defaults this year has been muted by the ability of traders to find new buyers.
Crushers have defaulted on cargoes totalling about half a million tonnes, citing their inability to open letters of credit amid tightening bank oversight on commodities imports, Reuters reported on Thursday.
Chenxi Group, a private oil, petrochemicals and crushing firm in coastal Shandong Province rumoured to be one of the firms defaulting on seaborne soy cargoes, declined to comment when reached by the FT on Thursday. In March, Chenxi had said it would cancel orders for Brazilian cargoes arriving between March and July.
Weaker demand for diesel and other oil products produced by Shandong’s independent refineries was one of the factors driving a 19.5 per cent drop in China’s fuel oil imports in the first quarter, Barclay’s analyst Sijin Cheng wrote on Thursday, indicating broader stresses on Shandong-based firms like Chenxi.
Overall, weak oil products imports offset an 8 per cent rise in crude oil imports in the first quarter. March crude imports hit a five-month low, after record January imports, but were still 2 per cent higher than March of last year.
Other commodities imports were relatively strong in March and the first quarter, although weak international prices caused the value of imports to drop 11 per cent in March. Despite concerns about the health of the Chinese steel sector, lower prices, stock building and greater demand for less-polluting overseas ore lifted iron ore imports by 15 per cent to 74m tonnes.
Additional reporting by Owen Guo
北京东方艾格农业咨询有限公司(Beijing Orient Agribusiness Consultant Ltd)的马文峰表示：“今年1月份和2月份中国大豆进口量极为巨大，这一状况压低了国内大豆价格。如果榨油商发现几乎无法实现盈利，他们可以把大豆转往韩国或日本。这与本世纪初的局面形成了极大对比。”