China’s Soybean Processors Cancel Orders; Want New Contracts

By William Bi

Feb. 26 (Bloomberg) -- China, the world’s biggest importer of soybeans, is canceling orders as demand for feed meal drops in the economic slowdown, two Chinese market researchers said.

Buyers canceled at least two cargoes in recent days, the government-backed China National Grain and Oils Information Center said today in a report. Others have also demanded that contracts are renegotiated, said Gao Yingbin at China Cereals and Oils Business Net.

Chinese buyers cut soybean imports, mainly bought from the U.S., by 6 percent in the four months through January as the sagging economy and falling meat prices eroded demand for animal feed. Futures in Chicago have slumped 11 percent this month.

“The effect of the deteriorating economy on oilseed demand is very apparent,” Gao said by phone from Beijing. “Hog prices are sliding, animal diseases are spreading, so livestock raisers aren’t adding herds and are running down feed inventories.”

Soybeans are crushed for meal, which is processed into animal feed, with the oil sold for cooking.

Falling soybean meal prices are fast eroding profits and forcing small and medium crushers to operate at a loss, China Cereals’ Gao said. Before the Lunar New Year holiday in January, crushers make about 300 yuan ($44) to 400 yuan for a ton of beans they process. Now it’s a third of that and falling, he said.

Some traders are now importing soybean oil instead of buying from crushers, the China National Grain and Oils Information Center said. “The import demand for U.S. soybeans will continue to shrink in the next few weeks,” the center said.

To contact the reporter on this story: William Bi in Beijing at wbi@bloomberg.net