Chinese soyabean importers have cancelled up to 600,000 tonnes of South American soyabean cargoes for shipment between March and May, two trade sources said, as an outbreak of bird flu in the country and negative crush margins curb demand. US soyabean futures slid to their lowest since February 24 on Wednesday on worries about waning demand from China, the world's top buyer of the oilseed.
Buyers are negotiating with suppliers to delay or cancel more shipments, the sources said. "There is a glut of soyabeans in China right now," one Singapore-based trader said on the sidelines of an industry conference in the city state. "They have washed out 10 panamax cargoes and want to cancel 30 more cargoes."
Chicago soyabean futures have lost almost 5 percent in four sessions with near-record production in Brazil and Argentina adding to bearish sentiment sparked by slowing Chinese demand. China's move to cancel soyabean cargoes comes after the country rejected almost a million tonnes of US corn following the discovery of Syngenta AG's MIR-162 strain which has not yet been approved by China.
China says corn shipments were rejected because of the GMO strain, but trade sources say the clampdown is being used to shield farmers from the supply glut and weak prices. Several soyabean cargoes were under discussion for shipment delays due to negative crush margin, said Gao Yanbin, an investment manager with oilseed trading firm Shanghai Shenkai Investment Co.
Gao confirmed the cancellation of around 500,000 tonnes to 600,000 tonnes of Brazilian soyabean cargoes by Chinese buyers. "The demand from livestock breeding is very bad, poultry demand was hurt by bird flu while restocking of hogs is low," said Gao. "There is no need for them to take those cargoes as they foresee a loss of around 400 yuan-500 yuan per tonne ($65 to $82)."
Market watchers had long expected that China would renege on some US purchase agreements as cheaper supplies from Brazil and Argentina arrived at export ports following harvest. But the market had not factored in the possible cancellation of some Brazilian deals. "This is going to be really bearish for South American cash prices," the first trader said.
China's feed grain imports, mainly corn and soyameal, have suffered a setback because of falling meat prices and a fresh outbreak of bird flu. The outbreak of bird flu in southern Guangdong province in January forced chicken farms to scale back on restocking, following huge losses last year after the culling of millions of birds. The agriculture ministry has said outbreaks of bird flu have caused 20 billion yuan ($3.3 billion) of losses to poultry breeders so far this year, compared with 60 billion yuan of losses in the first half of last year. At the same time, falling pork prices are pushing many small household pig breeders - also major consumers of animal feed - out of business. China's hog stocks hit a 10-month low in January, said the China National Grain and Oils Information Centre.
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