China May Offer Subsidies to Buy Domestic Soybeans

By Bloomberg News

Nov. 9 (Bloomberg) -- China, the world’s largest soybean importer, may offer subsidies to buyers of locally grown oilseeds to boost farm incomes, potentially curbing purchases from overseas, industry executives said.

“China may give a subsidy to local crushers who use domestically produced soybeans,” said Zhu Yufeng, managing director at Hanfeng Huayu (Beijing) International Trading Co. Ltd. The government may then allow the crushers to sell the soybean meal and oil onto the domestic market, Zhu said at a conference in Guangzhou at the weekend.

Slowing imports may help extend a decline in Chicago soybean prices, already down 1.1 percent this year. China’s government bought more than 6 million tons from the 2008 domestic crop in an effort to boost prices as the global recession threatened to cut farm incomes. Auctions of the soybeans, held to make room in reserve silos for the new crop, have failed to attract significant buying.

“If the government does indeed adopt this subsidy policy, then imports may fall because of the possible increase in consumption of domestically produced soybeans,” Chen Tao, chairman of Louis Dreyfus (Beijing) Commodities Trading Company Ltd., said at the conference.

The government may pay 200 yuan ($29) a ton to crushers who buy the oilseed from government supplies, three analysts and traders said in August. They asked not to be identified as the information was confidential.

Imports Jump

China relies mostly on imports to meet its soybean needs, with consumption estimated at more than 54 million tons this year and domestic supply at 14.5 million tons, according to the U.S. Department of Agriculture. China’s inbound soybean shipments jumped 13 percent from a year ago to 32.4 million tons in the first nine months of this year, customs figures show.

Soybeans for September 2010 delivery on the Dalian Commodity Exchange, the most-actively traded contract for locally produced soybeans, were little changed at 3,719 yuan a ton today. Prices have gained 10 percent this year.

“Despite robust demand in China, the high stockpiles will suppress local market prices and may lead to a situation where domestic prices are lower than the imported cost,” said Zhou Xuejun, general manager of vegetable oils and protein trading, Cargill Investments (China) Ltd.

Soybeans gained 1.5 percent to $9.6975 a bushel in Chicago at 3:33 p.m. in Singapore today.

China may slow vegetable oil imports in 2009-2010 amid high domestic stockpiles, Wang Yinji, deputy general manager at Cofco Oil & Grains Co. said Nov. 7. Soybean oil imports will fall 20 percent to 2 million tons and palm oil shipments will be “mainly flat” at 6 million tons, Wang said.

--Feiwen Rong. Editors: Richard Dobson, James Poole.

To contact Bloomberg News staff for this story: Feiwen Rong in Beijing at +86-10-6649-7563 or frong2@bloomberg.net