Thursday, February 9, 2012

Why Did Soybean Imports Fall in 2011?

During calendar year 2011, Chinese customs statistics showed that soybean imports totaled 52.64 mmt, down 2.16 mmt from 2010. An article in No. 1 Financial News published in January offers some explanations for the decrease in imports.

One Chinese market analyst explains that the Chinese government's informal price controls during much of 2011 combined with rising raw material prices to decrease profits from soybean crushing. Many companies cut back on operations and this slowed their demand for soybeans. The article cites third-quarter 2011 results released by one big company which showed profits down 58% in 2011.

A second analyst argues that China's soybean imports were unusually large during 2010. This, he attributes to a ban on Argentine soy oil imports during 2010 which removed 1.4 mmt of oil from the Chinese market. He estimates that this required 7 mmt of soybeans to replace the missing Argentine oil. Thus, the 2010 number was a blip and it's not surprising imports were not as robust during 2011.

The analysts see an expansion in soybean imports this year, close to the USDA's December estimate of 56.5 mmt. The analysts observe that several big Chinese companies--COFCO, Chinatex, and Sinograin--have added a lot of new soybean crushing capacity that will expand demand for soybeans. They also note that low soybean prices are stimulating soybean imports to a rapid pace of 5 mmt per month.

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