US officials cautious on China soy imports – but upbeat on palm

(Agrimoney) – US officials in Beijing retained a – relatively – downbeat forecast for Chinese soybean imports, citing waning interest in supplies sold from government stocks, but were more sanguine on hopes for palm oil purchases.

The US Department of Agriculture’s Beijing bureau retained at 86m tonnes their forecast for Chinese soybean imports in 2016-17, on an October-to-September basis – 1m tonnes below the USDA’s official estimate.

The bureau acknowledged, again, that China’s soybean imports, the world’s biggest, would gain some support from Beijing’s clampdown on imports of distillers’ grains, a byproduct of ethanol manufacture used as an alternative to soymeal as a high protein ingredient in livestock feed.

China’s imports of distillers’ grains, at 1.92m tonnes, fell 46% year on year in the January-to-July period, customs data show.

‘Weak soy product prices’

However, the bureau flagged too a trend of decreased interest in soybeans sold from government stocks, with 118,630 tonnes sold at the latest auction, last week, down from 332,000 tonnes at the July 22 event.

“The declining purchase rate is reportedly due to weak prices for soymeal and soyoil since August,” the bureau said in a report.

“Weak [soy product] prices, coupled with soy food processors’ concerns with quality, impacted crushers’ participation in the auction.”

Pork profitability

The drop in soymeal prices – which for the best-traded January contract have fallen to 2,886 yuan a tonne on China’s Dalian exchange, from a high of 3,475 yuan a tonne two months ago – has come amid an easing in margins at China’s hog producers, the main consumers.

Industry data showing that hog output margins for the first half of last month, at 500 yuan ($76) per head were “much lower than the 1,000-1,500 yuan per head in May”.

The bureau flagged too industry expectations of a “slight fall” in Chinese pork output this year, “based on a slow recovery in the swine and soy inventory” from a sector downturn.

China is the world’s top pork producer, and consumer, containing more than half the world hog herd.

Market estimates

The bureau also flagged a range of estimates from other commentators of soybean imports for 2016-17 coming in below the USDA’s 86m-tonne forecast, saying that “China’s leading industry sources generally agree” on a figure of “about 85m tonnes”.

The official CNGOIC think tank, for instance, has a forecast of 85m tonnes, while analysis group JCI estimates the figure at 84.6m tonnes.

“It is worth mentioning that the ministry of agriculture’s China Agricultural Outlook Committee lowered its forecast 2016-17 soybean imports by 1.5m, tonnes to 83.5m tonnes from its July report.”

Palm stocks tumble

However, the bureau, at 5.20m tonne, was a 50,000 tonnes more upbeat than the USDA itself on expectations for China’s palm oil imports over 2016-17, again on an October-to-September basis.

While China’s palm oil imports fell 31% to 2.20m tonnes in the first seven months of calendar 2016 – undermined by factors such as a weakened renminbi and the resumption of export taxes on the vegetable oil in Indonesia and Malaysia – volumes “may recover during August through September”.

The bureau cited supported for imports from “low domestic palm oil stocks”, following the period of weaker purchases, pegging China’s inventories at the close of 2015-16, at the end of this month, at just 100,000 tonnes.

Stocks at that level would be by far the lowest on official USDA data going back to 2008-09, with the bureau terming carryout inventories from 2015-16 at “less than half of the average level in the past five years”.

Cargo surveyor data

Data from cargo surveyors backs ideas of higher palm oil imports by China from Malaysia, the second-ranked exporting company, last month, with SGS pegging the figure at 289,550 tonnes, a rise of 28% month on month.

Intertek estimates China’s palm imports from Malaysia last month at 243,600 tonnes, a rise of 12.1%.