A Quick Thought On Chinese Soybean Demand
May 22, 2012
Chinese soybean demand is in question by the "bears", as some traders fear this weeks dumping of government soybean surplus onto their domestic marketplace could setback demand and possibly even prompt a few "old crop" soybean cancelations, especially since Chinese crush margins have recently turned negative. Many analyst are now thinking the Spring highs in "old crop" soy will NOT be penetrated. I should point out however on a broader perspective "total" soy imports in China for the month of April were adjusted higher to 4.883 million metric tons, that is significantly higher than the initial estimate of 4.45 million. Several in the trade are actually now thinking if May imports come in as strong as some have indicated, 5.6 million plus, then the current USDA estimate of 56 million metric tons imported during the 2011/12 marketing year will need to be pushed significantly higher. My guess is we will eventually see the USDA move to 58 million metric tons, with an outside chance the number could push as high as 60 million. I am not as bullish as some, but I do believe anyway you slice it, the USDA number is currently too low and global stocks will tighten even further. One thought you may want to consider is that Chinese importers may soon be prompted to roll "old" crop" purchases into "new crop," especially if their domestic demand slows and crush margins stay negative. I am of the belief Chinese importers have placed so called "insurance policies" on their South American purchases by booking more US "old crop" supplies than they needed. This way if South America can't deliver the soybeans then Chinese importers can take delivery of the US supplies. If South America comes through then the Chinese will simply roll their US purchase forward to the new crop. This is just another reason why I prefer building length in new crop rather than old crop soybeans.
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