Economy

China said to seek Brazil, US soybean oil supply

(Agencies)
Updated: 2010-05-05 17:28

China, the biggest user of cooking oils, told State-owned trading companies to seek supplies of soybean oil from Brazil and the US, two company executives with direct knowledge of the matter said.

The Ministry of Commerce told three companies, including Cofco Ltd, at a meeting last week to source supplies from those countries instead of Argentina, said the executives, who declined to be identified as they are not authorized to discuss the matter publicly.

Soybeans in Chicago have increased 5.5 percent since the start of April on speculation China will increase imports of soybeans for crushing to replace Argentine oil. China's importers have no plans to load shipments of Argentine material in May and didn't take any in April, the China National Grain & Oils Information Center said.

"We've heard that traders have been trying to get out of their contracts with Argentine suppliers" and switch to Brazil, said Tommy Xiao, analyst at Shanghai JC Intelligence Co, by phone from Shanghai. Imports of soybeans in second quarter will surge, he said.

The Asian nation halted shipments from the world's biggest supplier of soybean oil as part of a trade dispute. Other companies at the meeting last week were Chinatex Ltd and China Grain Reserves Corp. The country's soybean imports may reach a record 14 million metric tons between April and June, the grain and oils information center said April 28.

Brazil prices higher

China Grain Reserves, also known as Sinograin, last month canceled a previously booked cargo of Argentine soybean oil, the executives said. A subsidiary owned by Cofco initially tested the official stance by placing an order with Argentina, and later had to switch to Brazil, one executive said.

Calls requesting comment from Cofco, Sinograin and Chinatex were not immediately returned.

Prices in Brazil are higher than Argentina, and that's deterring some buyers, they said. Supplies from the US currently face a technical barrier because the government requires some official certifications which the US doesn't provide, they said, without elaborating. The government may seek to resolve that to encourage US imports, they said.

Importers loaded 5.5 million tons of soybeans in April destined for China, one of the executives said. As the main product from crushing is meal, the record imports of beans may cause meal inventory to surge, potentially hurting crush margins.

Soybean futures gained 0.6 percent to $9.93 a bushel in Chicago Wednesday.