Many Chinese buyers are considering shifting to soybeans from South America because US soybeans are becoming more expensive, but they fear the slow Brazil application process will limit imports from that country.
A trader from China National Cereals Oils and Foodstuff Import & Export Corp (COFCO) said it is impossible for local crushers to keep paying high prices for US soybeans.
In the Chicago Board of Trade, soybean futures continue on a bullish tear. New contracts for May have jumped to a high of US$10.22 per bushel, the highest level since the summer of 1988.
"I do not think people are willing to pay the high premium for US soy," the trader said.
Analysts estimated China has already bought about 7 million tons of South American beans, with monthly imports possibly reaching 2.5 million tons in the peak months of June and July.
"But we are also weighing the risks in importing soybeans from South America, because we fear the imports will be delayed in the absence of necessary documents," the trader said.
The Ministry of Agriculture said it had not started to accept applications for safety certificates for imports of Brazilian genetically modified soybeans, saying the government of the South American country had yet to submit necessary documents.
Most of China's soybean imports are genetically modified.
Another major South American exporting country has submitted an application.
The Ministry of Agriculture in February awarded the first safety certificates for genetically modified crops from overseas to US Monsanto Co.
The certificates are necessary, as the ministry will place imports of agricultural biotech products under normal administrative rules on April 20, after the interim rules expire.
To streamline the import procedures, the authorities said they are considering allowing soybean buyers to apply for import permits from the quarantine bureau at the same time as suppliers apply for certificates from the agricultural ministry.
Huang Jikun, an economist with the Agricultural Policy Research Center under the Chinese Academy of Sciences, said China's soybean imports are unlikely to rise dramatically this year, despite the central government's decision to approve import of GMO soybeans.
"Due to high prices, the effects of bird flu and reduced market speculation, we predict imports this year will keep level with last year's," Huang said.
Market demand for imported soybeans should return to normal levels, and buyers will not stock soybeans given the normalized rules, Huang said.
China imported a historical high of 20.7 million tons last year.
He continued that poor crush margins also contribute to reluctance to purchase.
For processing one metric ton of imported soybeans, margins in the coastal regions range between a negative 80 to 100 yuan (US$9.67 - 12.08) a metric ton.
But Huang also pointed out that losses had narrowed because of a recovery in domestic soymeal prices.
Offers were seen at around 3,500 yuan (US$423) a ton, up from around 3,200 yuan (US$386) a week ago and below 3,000 yuan (US$362) in mid-February.
Since late last year, local soymeal markets have remained depressed because bird flu led to low demand from local livestock and feedstuff producers.
"Buyers may start to show more interest as meal prices are recovering," Huang said.
(China Daily March 22, 2004)
