* China's May-July soybean imports seen at record
* Higher imports, weak demand to weigh on margins
* Soymeal demand seen falling 15-20 pct, pinched by bird flu
By Niu Shuping and Naveen Thukral
BEIJING/SINGAPORE, May 8 China, the world's
fourth-largest soy producer and biggest buyer, expects record
bean imports in May-July even as a latest bird flu outbreak cuts
demand for the feed crop, pressuring crush margins and
potentially triggering cargo cancellations.
A triple whammy of surging imports, sluggish demand and weak
processing margins is also likely to weigh on China's orders for
U.S. soy when the new marketing season gets underway in
September, industry sources and analysts said.
Cargo cancellations by Chinese processors and lower demand
could depress global prices which have risen 8 percent in
the past month underpinned by tight old-crop supplies and slow
farmer selling in the United States.
Shipments from Brazil, expected to overtake the United
States as the world's top producer this year, were hit by severe
port congestion earlier this year, but loadings have been
stepped up and exports last month were at near-record levels.
The arrival of those delayed cargoes as well as normal
bookings is set to push total imports to China - which buys more
than 60 percent of all globally-traded soybeans - to nearly 19
million tonnes in May-July, up 13 percent from the same period
last year, according to trade and analysts' estimates. For
January-March, China's soybean imports fell 13.4 percent from
last year to 11.5 million tonnes.
"Crushing margins have been positive so far but we expect
them to fall or even turn negative when the tsunami of beans
hits China in June and July," said a Singapore-based trading
manager at a company which runs processing plants in China.
"Imports could reach 6 million tonnes in June and up to 7
million in July," the manager added.
Imports this month are seen climbing to 5.6 million tonnes,
according to the China National Grain and Oils Information
Centre, an official think-tank, from below 4 million tonnes in
April. China's record imports were 6.2 million tonnes in June
Expectations for a glut of cheap imports and an oversupply
of soybeans have already prompted Wilmar International Ltd
and COFCO-owned China Agri-industries to cut
soyoil prices for retailers by about 15 percent, local media
"Chinese crushers are not signing many new deals because
soymeal demand is poor," said another Singapore trader. "The
poultry industry is still suffering from the impact of bird flu
which will slow demand for soybeans."
Chinese authorities have culled hundreds of thousands of
birds in a bid to contain the spread of the H7N9 virus that has
killed 31 people and infected 129 others.
Poultry sales have dropped 80 percent in eastern China and about
30 percent elsewhere in the country. Breeders have cut back on
restocking young chicks.
The avian flu scare, on top of a series of meat scandals -
with rotting pig carcases floating down a major river and rat
meat sold as lamb - has hit meat consumption and dented soymeal
demand. China accounts for half of world pork consumption and
close to 15 percent of global poultry production.
"We expect soymeal demand will fall 15-20 percent from
normal consumption over the next 4-5 months," said Gao Yanbin, a
senior analyst at Jinshi Futures Co. Ltd. "With large soy
arrivals from late May, soymeal will be in excess supply ...
processing margins for soybean could fall to a negative 100 yuan
($16.25) per tonne."
That forecast decline - with processors effectively paying
to crush beans - compares with profits as high as 280 yuan per
tonne in the first quarter when supplies were tight due to lower
imports from the United States and the Brazilian port logjams.
Singapore-listed Wilmar, one of the biggest soybean
suppliers to China, said its January-March net profit rose by
nearly a quarter, largely due to a recovery in its oilseeds and
"In China, the bird flu will affect meal consumption in the
short term, but is not expected to have a long term effect. We
remain optimistic about the long-term prospects of China," CEO
Kuok Khoon Hong said in a statement.
The head of Japanese trading house Marubeni Corp
predicted China's soybean demand would rise, rather than fall.
"The impact from bird flu will naturally depend on its duration,
but for China we don't see it persisting long, so the impact
will be fleeting," Fumiya Kokubu told reporters in Tokyo.
Marubeni, which reported a near-20 percent jump in full-year
net profit, was told by Chinese regulators last
month it could go ahead with its $5.6 billion acquisition of
U.S. grain merchant Gavilon as long as the two businesses
maintain separate trading units when selling soybeans to China.
The tough conditions attached to China's approval of that
deal underscore Beijing's anxiety over food security.
China, which gets more than 80 percent of its soy supplies
on the global market, has booked 6.77 million tonnes of new U.S.
crop as of last week, down from 7.11 million tonnes during the
same period last year, according to the U.S. Department of