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Soybean supply is expected to surge on the market in China owing to increased imports and existing stocks, traders said last week.
And this increase in supply is expected in defiance of current high futures prices, they said.
China is expected to have imported 2 million tons soybean last month and will buy another 1.7 million tons in April, according to a latest report by China National Cereals, Oils and Foodstuffs Import and Export Corp (COFCO).
The US Department of Agriculture estimated China will import 16 million tons of soybean in the 2002/03 season (from October 2002 to September 2003).
That compares with the 16.25 million tons forecast of agricultural officials with the US embassy in China.
Domestic futures prices of soybean have fluctuated within a small range at the high end of the band last week, seemingly unaffected by news that the Chinese Ministry of Agriculture has allowed Brazilian soybean to re-enter China.
Six ships loaded with Brazilian soybean are expected to arrive at Chinese ports in mid-April, business insiders said. Brazilian soybean is US$12 cheaper than US soybean.
Some of the Brazilian soybean is genetically modified but the Brazilian Government was unable to provide safety certificates before February, which caused the world's third largest soybean producer to be blocked from China.
Brazil had been exporting soybean to China with safety certificates from the US Government but the measure was forbidden after the Chinese temporary measure expired on December 20.
A Brazilian association overseeing the country's vegetable oil industry has revised Brazil's soybean production in the 2002/03 season to 50.8 million tons from 49.6 million tons two weeks ago.
A report issued by the agricultural department of the US embassy in China predicted last Wednesday that China's soybean production will reach a record high of 16.3 million tons for the 2002/03 season and a new record of 17 million tons for the 2003/04 season.
But domestic soybean futures prices shrugged off the news and remained strong last week because speculators were reluctant to sell when rising futures prices were expected, analysts said.
They expect domestic soybean prices will fluctuate within the small range for the foreseeable future.
The market has guessed the Chinese Ministry of Agriculture will be unable to finish field tests on genetically modified organisms (GMO) on time and will prolong its temporary measures to April 2004 in order to avoid disrupting normal trade.
Media reported the Ministry of Agriculture has notified foreign soybean traders, including US Monsanto and Swiss SYT, of the extension of temporary GMO measures to April 2004 because more time is needed to complete field tests.
But Chinese agricultural officials said no official notice has been issued.
Minister of Agriculture Du Qinglin told reporters at the 10th National People's Congress early last month that China's field tests will be completed before the September 20 deadline in high-temperature regions such as Hainan Province.
He pledged that China will carry out its promises on GMO issues and will not let field tests disturb trade.
China issued a GMO rule in June 2001 in consideration of food safety for domestic consumers and decided to adopt temporary measures before December 20, 2002 to ensure that safety tests on GMO would not disrupt soybean trade, mainly between China as the world's largest soybean importer and the United States, the world's largest soybean producer.
The temporary measures were extended to September 20 in October last year and major soybean traders guess the measures will be renewed again because China started field tests in January and they expect the tests will take more than nine months.
They accused the agricultural ministry of inefficiency as well as unpredictability and instability in their policies.
Officials from Monsanto even questioned whether the field tests were necessary, according to Dow Jones.
But sources close to the GMO office of the Chinese Agriculture Ministry said the issue of whether GMO foods are safe for consumers is controversial around the world and tests are necessary to safeguard public health.
She said China's present entry-exit quarantine and quality inspections on GMO foods have been loose and the Chinese Government should strengthen them.
Despite the new rule, China imported 11.32 million tons of soybean last year with 4.62 million tons coming from the United States. A record high of 1.19 million tons soybean was imported from the United States in January, she said.
US soybean sales to China have risen 76 percent year-on-year to 7.42 million tons since last September, according to the US Department of Agriculture.
Argentina, the world's second largest soybean producer, also announced last week it has delayed talks on bilateral soybean trade, previously scheduled for April, until the new administration of Argentina takes control on May 25.
A total of 95 percent of Argentinian soybean is genetically modified. The country sold US$726 million tons soybean to China last year, comprising 70 percent of Argentina's total exports to China.
(Business Weekly April 8, 2003)
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