China import crackdown, war on smog seen boosting soyabean crushers' margins

China's crackdown on genetically modified (GMO) soyabean imports and its intensifying war on smog this winter will boost soyameal prices and inflate crushers' margins, extending an unexpected windfall for the oilseeds sector, executives said on Wednesday. Crushers in the world's top importer returned to profit in August, after months of losing cash, as the soyameal glut depleted due to strong demand from the livestock industry.
Soyameal prices will be supported by "the regulations on GMO and the environmental crackdown," said Si Yao, head of trading in China at ADM (Shanghai) Management Co., Ltd, at an oilseeds conference. "Some plants did not get GMO certificates, and that will support prices in the short term," he said.
The most-active soyameal prices were last at 2,825 yuan ($426.57) per tonne while the Dalian crush margin was 65.75 yuan per tonne, compared with losses of 70 yuan in early August before plants returned to profit. They had been losing money since February.
The comments come as Beijing takes longer to issue safety certificates for cargoes of GMO soyabeans, forcing at least two plants to suspend operations and tightening supplies of soyameal in the south.
It's the latest major jolt to the world's largest soyabean market after major crushers shut plants due to delayed cargoes in August.
The subject was a hot topic of discussion at an oilseeds conference organised by Dalian Commodity Exchange this week.
"Getting a certificate is not as easy as before. Some beans could not be loaded, which will support crushing margins in the next few months," said Yanchuan Li, general manager of the oilseeds processing division for COFCO.
The tougher import measures and the suspension of two plants caused panic among some crushers, which have quite low inventory levels, said a soyameal trader based in southwestern China on the sidelines of the conference.
On Tuesday, one of the plants reopened.
An environmental crackdown targeting the country's 28 smoggiest cities across the north will also prop up prices and crushing margins.
"There will be stricter, more detailed environmental supervision measures. It will also affect normal operations and product delivery at some crushers," said Yao.
Stringent steps to curb output across heavy industry have roiled commodities markets from natural gas to aluminium and soyameal.
"If the air is not nice in northern China, the environment is not good and crushing plants will have to limit operations, it will also tighten supplies of soyameal," said Li with COFCO.