China's crushing margins for soyabeans fell to nine-month lows this week as soyameal stocks rose to their highest since mid-2012 amid sluggish end-user demand, pulling prices for the livestock feed to their lowest in a year. Soya processors in Shandong province, a key crushing hub in the country's east, were losing 261 yuan ($37.98) a tonne on Wednesday, the worst margin in nine months.
Processors have been losing money on each tonne of beans crushed since vegetable oil imports and reserve rapeseed oil auctions fed into a glut that weakened edible oil prices and dented crusher profitability in late February. "Crushers are operating at a high level and stocks of both soyameal and soya oil keep growing. But at the same time, demand is weak," said Liang Yong, an analyst with Galaxy Futures.
"People's demand for vegetable oils is quite stable, while demand for soyameal is weak as poultry farms are losing money and restocking of hogs is slow due to falling profits," Liang said. China's weekly stocks of soyameal jumped to more than 1 million tonnes on Wednesday, up 14 percent from last week and the highest since August 2012. Soyameal prices in Rizhao, Shandong, sank to 2,680 yuan per tonne on Wednesday, their lowest level in a year.
Crush margins are expected to remain low for at least the next couple of months given the sluggish demand outlook for soyameal and enduring surplus of edible oils, analysts said. China's edible oil supply glut is likely to worsen in the short-term as the country bought 423,988 tonnes of palm oil in April, up 54 pct from a year ago. This could further hit crush margins as ample supplies of edible oils drag down prices of soyabean oil. "Soyameal buyers are very cautious now. Crushers usually face greater pressure in May and June," said Monica Tu, an analyst with Shanghai JC Intelligence Co, Ltd.
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