Soybeans May Drop as China Turns to South America, Survey Shows

March 12 (Bloomberg) -- Soybeans may drop below $9 a bushel for the time since October as China, the world’s biggest importer, may switch more cargoes from the U.S. to South America, according to a Bloomberg survey.

Prices may decline 4 percent or more from the current price of $9.36 a bushel in the next month as more cancelations may be reported, according to nine out of 10 traders and researchers contacted in China for the survey. A net purchase of 192,400 tons of U.S. soybeans from China was canceled in the week through March 4, the Department of Agriculture said yesterday.

China, buyer of about half the world’s soybean exports, may seek more supplies from South America as Brazil and Argentina gather record harvests and before the new U.S. crop arrives in the fall. Soybean futures tumbled 2.9 percent yesterday, the most in almost two months, on speculation that importers will curb purchases of U.S. supplies.

“Prices will certainly drop, maybe to $8.70 to $8.90 a bushel,” said Li Qiang, managing director at Shanghai JC Intelligence Co., in Shanghai. More cancelations “are likely to come out. I don’t think we have seen the end,” he said.

Imports by China surged 23 percent to 11.8 million metric tons from December through February from 9.6 million tons in the year ago period, according to customs. Soybean oil dropped 5.3 percent this year on the Dalian Commodity Exchange and meal fell 8.6 percent. Live hog prices also have declined on lower demand, according to the National Development and Reform Commission.

High Inventory

“Demand for soybean meal isn’t good right now, and the nation’s soybean inventory at ports is at a historical high of 4.7 million to 4.8 million tons,” said Huang Zhifeng, analyst at China Cereals and Oils Business Net, from Beijing. “I think soybean prices will have to slide more.”

The bulk of the country’s purchases from South America may arrive in April and May, so the oversupply may get worse before it gets better, Huang said.

China may still increase soybean purchases to a record this year as rising incomes and the world’s fastest growing major economy spur consumption of cooking oil and meat.

Imports may climb to 44 million tons in 2009-2010, Wang Yinji, a deputy general manager at Cofco Oils & Grains Co., told a conference in Qingdao March 10. The nation bought 41 million tons in 2008-2009, U.S. Department of Agriculture data show.

The country aims to be 40 percent self-sufficient in oilseeds in the “medium to long-term”, so 60 percent of supplies will need to be imported, according to Bao Kexin, president of China Grain Reserves Corp.