China is losing its appetite for soybeans ahead of the Lunar New Year holidays as crushing margins are poor due to soft domestic meal prices and a sharp rally in Chicago prices in the past several months.
Traders expect China to buy only up to 10 additional cargoes of high priced US soybeans this season, unless domestic soymeal prices rebound after a week-long holiday starting on January 22.
"Open positions for US (soybeans) are very limited, only five to 10 cargoes for February and March," said a trader based in Shanghai. "Crushing margins are very bad."
Another Shanghai trader said: "I think local crushers do have difficulties in buying more. I think they have overbought a little bit. We still have the local crop available."
Traders had seen little interest so far this week after three to five US cargoes were traded last week at cost and freight premiums between 180 and 200 US cents per bushel over the CBOT March for shipment in February and March.
They calculated about 2.3 to 2.5 million tonnes of US soy had made it to China in December, following a buying spree in October. Some expected similar arrivals for January, while others saw the level declining towards 1.8 million tonnes.
Traders said they expected Chinese purchases from the United States to stand at 8.6 to 8.7 million tonnes in the year ending September 30, 2004, after booking about 8.5 million tonnes so far. The USDA put China's total 2003/2004 soy imports at 22 million tonnes, up from 21.42 million a year earlier.
Traders said China had sealed a few more South American cargoes last week at premiums around 160 US cents per bushel over the CBOT May, raising the total to around 4.5 million tonnes for shipment after April.