China Jan Farm Product Imports Jump On Cheaper Prices - Analysts

China’s agricultural commodities imports in January surged from a year earlier because they were cheaper than local options and as companies took shipments in anticipation of a recovery in consumer and industrial demand, said analysts Wednesday.

The increase from a year earlier in the volume of the various imports, from soybeans to wheat to edible oil, in January ranged from 35% to more than 10 times.

Companies are finding it cheaper to import farm products than to buy them in the domestic market, where prices are being propped up by the government, the analysts said.

The Chinese government has been buying local soybeans, corn, wheat and rice to support farmers.

Over the weekend, it raised the minimum purchase prices of rice for this year by 3.3%-10.5% from last year.

The National Development and Reform Commission said the move was intended to “guide steady price increases in the grain market, protect the motivation of farmers to grow grains and further foster development of grain production.”

Han Jun, head of the Rural Economy Department at the State Council’s Development Research Center, also said earlier this week the government will continue to protect soybean farmers’ interests through its purchasing policy and stick to the policy of selling the crop at higher than purchase prices.

“The market is expecting (higher) prices (for local commodities) in the first half despite an expected record high harvest in South America, because the government policies will support the prices,” said Dong Shuangwei, an analyst with Capital Futures.

Hu Shengming, an analyst with Tianqi Futures, said he doubted global and local soybean futures prices will decline much, noting that they haven’t fallen significantly even though news of an expected record harvest in South America has been factored in.

Companies buying in anticipation of a recovery in consumer and industrial demand also helped to boost imports at the start of this year.

With the recovery in the farming industry, feedmeal demand is likely to improve in the second half of this year, which could push soybean imports to above 45 million metric tons this year, said Tu Xuan, an analyst with commodities consultancy Shanghai JCI.

She said most of the soybean demand will likely be met by imports, which would further erode the market share of local soybean suppliers.

China imported 42.55 million tons of soybeans last year, up 14% on year.

Source: CME Group