April 8, 2020 / 6:59 AM / 2 months ago

UPDATE 1-China releases 500,000 T of reserve soybeans to COFCO amid supply crunch - sources

(Adds details on Brazil exports, graphics)

By Hallie Gu and Gavin Maguire

BEIJING/SINGAPORE, April 8 (Reuters) - China’s state stockpiler Sinograin has granted another 500,000 tonnes of soybeans from state reserves to the country’s top state-owned crusher COFCO for commercial crushing, according to two sources briefed on the matter.

The move comes after rains delayed cargoes from Brazil, China’s top supplier of soybeans, and caused soybean inventories to fall to record lows, forcing some plants to curb operations.

The supplies, granted on Tuesday, will be delivered to COFCO’s crushing plants in the next couple of weeks, according to one of the sources.

The release will help major crushing firms sustain output of soybean meal until record volumes of fresh soybeans from Brazil and elsewhere arrive later in the month and from May onwards.

It will be the second batch of state reserve soybeans granted to COFCO this year. Sinograin released 500,000 tonnes to the state-owned agriculture conglomerate earlier in the year, said the sources, both of whom declined to be named as they were not authorized to speak to the media.

“It is mainly to make up for the supply vacuum caused by cargo delays,” said one of the sources.

“It does not have major impact on the market.”

National weekly soybean stocks in China CFD-SBSTK-NATN were at 3.49 million tonnes by April 7, down from 3.55 million tonnes last week, close to record low levels reached in March.

Soymeal inventories CFD-SBMST-NATN fell further to 177,000 tonnes, the lowest since at least June, 2011.

Relief is on hand, however, with flows assessments by Refinitiv and shipping agency Williams pegging March 2020 soybean shipments from Brazil at an all-time high of 12.6 million tonnes, 43% more than the five-year average for that month. At least 60% of this is destined for China, with shipments taking 40-50 days to arrive.

Such a large delivery should go some way towards replenishing tight inventories, and may put downward pressure on local soybean prices which have rallied over 40% year-to-date as domestic soybean stocks shrank by 26%.

“The market is worried that there will be too much pressure (on supplies) later,” said Xie Huilan, analyst with Cofeed, an agriculture consultancy.

“The demand outlook is not very promising,” Xie said. Soybean processors are worried the economic impact of the coronavirus outbreak will dampen demand for soy products such as meal to feed animals and oil for cooking.

They are also concerned about a potential fall in soy prices once Brazilian supplies arrive.

“People get more worried as May approaches ... worried that soybeans will arrive in a concentrated manner and then pressure would mount on supplies,” said a manager with a major crusher in southern China.

“Be it traders or feed producers, everyone is rushing to implement existing contracts, afraid of the risk of prices falling,” he said.

Reporting by Hallie Gu in Beijing and Gavin Maguire in Singapore; editing by Richard Pullin

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