Process Management

News last update:6 Aug 2012

Freight rates force China to buy Indian soy

China is turning to nearby India for soy meal as record freight rates for dry cargoes are pushing up costs for soy imports from the US, while the demand for animal feed is also picking up from the hog sector.

While traders at a grains conference in Perth put Chinese soy meal purchases from India at 50,000 tonnes, Chinese industry officials said the country had booked 70,000-80,000 tonnes for shipment between October and November. They said the price was $310-$330 a tonne, including cost and freight.

China is a bit short of soybeans right now,” said one trader attending the conference. A manager from a grains trader in China's southern province of Guangdong said: “There is a price gap. Trading firms and feed mills are importing to take benefit of the difference.”

The traders and officials said China was interested in booking possibly another 100,000 tonnes for shipment before the end of the year, if prices did not surge further.

Freight rates soar
With freight rates for dry cargoes up at new records, costs for bringing soy from the US Pacific North West have more than doubled since the start of the year to well beyond $100 a tonne. It would cost even more for imports from the US Gulf.

This is making soy imports from the US less attractive, despite a rebound in Chinese soy meal prices, ahead of the national day holidays early in October, especially as soy oil prices are under downward pressure.

Quarantine threat
In addition, Chinese soy importers are worrying about quarantine authorities, who have strengthened inspection of soy cargoes from the US or Argentina in a possible trade backlash following a massive recall of toys made in China. The traders said three or four cargoes from the two origins faced delays in discharging soy or crushing as the quarantine authorities found phytosanitary problems.

Demand for animal feed was recovering both in the poultry and hog sector as high meat prices have encouraged farmers to stock up on chickens and pigs, they added. They were also replenishing feed stocks from very low levels earlier this year.

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