China may sell more soy reserves on strong demand

BEIJING, April 8 - A rise in soymeal demand in China has spurred soybean imports by the largest buyer and triggered concerns the government agency may release more reserves into the domestic market, traders said on Wednesday.

Sinograin, which manages the state reserve, has sold about 100,000 tonnes of imported soy reserves in its latest sale last month to crushers, bringing its total sales so far in the year to about 500,000 tonnes, they said.

"It has so far released small amounts because soy prices are still not good enough. If prices continue to rise by another 200 yuan (per tonne), it may release stocks of a large amount," said one trading executive with a major trading house.

Sinograin, which holds about 2 million tonnes of imported soy and some 3.5 million tonnes of reserves, could release large quantities if prices rose to 3,700 yuan ($541.2) per tonne or higher, the price it paid farmers for domestic soy, traders said.

Imported U.S. soybeans <0#ASSOYA-CN> at major Chinese ports were traded 10 percent up to more than 3,500 yuan per tonne over the past month after soymeal prices <0#ASSOYMEAL-CN> rose more than 17.8 percent. Rising prices indicate meat demand has not fallen as earlier anticipated, traders said.

"Demand from both poultry and pig breeders is strong, stronger than we had expected, and there is a possibility for prices to go up further," said the manager.

Sinograin recently sold about 100,000 tonnes to crushers in Dalian in the northeast and Nantong, Jiangsu, in the east. The crushers bought the soy to profit on rising prices of soy products, said one trader with an international trading house.

The crushers also worried about a delay in shipment from Argentina, where farmers were on a week-long sales strike last month. The soy trade has since resumed normal operations.

"Sinograin has bought back the amount it sold. It sold at a higher price and bought it back more cheaply," said the trader.

IMPORTS STRONG

Analysts and traders expect soy imports in March will hit 3.9 million tonnes, the highest level since October and a similar amount of imports is expected for April as well.[ID:nPEK295048].

The strong imports were fuelled by Beijing's stockpiling of domestic soybeans since late last year, which had supported domestic prices above those of imports.

Traders in the United States, the largest exporter, say China has shown fresh interest in expensive U.S. soybeans for May-June shipment despite it being the season for South American soy. Brazil soy is less expensive but near-term shipping periods are sold out [ID:nN07492791].

Uncertainty over a farmers' strike in Argentina has led to Chinese traders booking less this year.

"We are still buying for May shipment. The amount for the month will be definitely larger than 3 million tonnes," said the first trading manager.

Meat consumption has not declined as anticipated, as lower pork prices in urban areas has countered a drop in demand from rural regions hit by rising joblessness, feed officials said.

"The overall meat demand has not changed much. Lower prices of meat have promoted more consumption in cities, offsetting the fall in rural areas," said Han Song, a manager with a feed information provider (www.chinafeedonline.com).

Lean pork prices in mid-March fell as much as 27 percent from the year-ago period and were down 11 percent on the month, according to official figures.