Chinese Crush Margins Boost Soybean Demand

January 18, 2013 12:11 AM

What Traders are Talking About:

* Crush margins boost Chinese soybean purchases. China has been an active buyer of U.S. soybeans recently, as prices dropped sharply ahead of USDA's Jan. 12 reports and crush margins turned positive. USDA reported yesterday sales to China of 845,600 MT for the week ended Jan. 10. State-run China National Grain and Oils Information Center says Chinese purchases from the U.S. and South America last week totaled 1.8 MMT to 1.98 MT, well above its normal appetite of 1.2 MMT for this time of year.

The long and short of it: With crush margins being supported by strong demand for soybean meal (feed use) and soyoil (ahead of the Lunar New Year celebration), Chinese end-user demand for soybeans will remain strong. The U.S. will get a portion of near-term purchases, but new-crop South American supplies will be China's preference for March delivery forward.

* China's economy snaps losing streak. China's economy grew at 7.9% clip in the fourth quarter, snapping a string of seven consecutive quarters of lower gross domestic product (GDP). For all of last year, China's GDP was 7.8%, which was the lowest since 1999. But economic growth for the fourth quarter and 2012 topped expectations by 0.1 point each. Chinese officials are cautiously optimistic moving forward, predicting "stable" growth this year.

The long and short of it: Global markets are getting a boost from the Chinese GDP data as it further supports notions that the world's second largest economy and the top consumer of commodities has turned the corner.

* Markets closed Monday. Markets and government offices are closed Monday, Jan. 21, for Martin Luther King Jr. Day. Grain and livestock markets will observe normal trading hours today ahead of the extended weekend.


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