Soybean demand from China, the biggest buyer, may climb in the second half of this year as consumption by the hog industry gains, boosting processing profits and imports, a Bloomberg News survey showed. Crushing will likely expand as high pork prices and government subsidies prompts farmers to boost pig production, according to three researchers surveyed by Bloomberg News. The announcement by Wilmar International Ltd. (WIL) that it will lift cooking oil prices may signal the government has ended price caps, improving crushing sentiment. Rising consumption may help lift prices of soybeans traded in Chicago, which have declined 1.7 percent this year partly because of China’s lower-than-expected demand caused by smaller pig herds. Gains in crush margins may also boost profits of Wilmar and China Agri-Industries Holdings Ltd. (606), the country’s top two crushers. “The market is generally more optimistic about the second half,” said Monica Tu, an analyst at Shanghai JC Intelligence Co. who took part in the survey. “Animal feed demand in the third quarter has shown evident improvement.” Imports dropped 8 percent to 23.7 million tons in the first six months, according to customs data. Annually, shipments may decline for the first time since 2004 as processors use cheaper domestic crops and lower hog numbers curb feed demand, state- owned Grain.gov.cn said July 18. China crushes soybeans mainly for the meal to raise pigs, chickens and livestock. China aims to increase the number of breeding sows as it rolls out incentives to hog farmers to boost the supply of pork and stabilize prices, the Ministry of Agriculture said yesterday. Record Prices Wholesale spot prices of pork reached a record 26.15 yuan ($4) a kilogram in the week of July 15, according to the Ministry of Commerce. Inflation in the world’s fastest-growing major economy accelerated to the highest in three years in June from a year earlier, driven by a 57 percent increase in the retail cost of pork. Crushing of domestic soybeans may be as much as 5.3 million tons this year, compared with 2.2 million tons in 2010, Grain.gov.cn has said. Soybean meal prices in Shandong province, the largest importer of the oilseed, have gained 1.1 percent from 3,000 yuan a ton, the lowest this year, on May 20, data from Shanghai JC show. Imports in 2011 may be 51 million tons, down from 54.8 million tons last year, Grain.gov.cn said July 18. Shipments may rebound to about 54 million tons in 2012, it said. Inventories Climb Inventory of live hogs has risen to 456 million by June, after touching 445 million in January, the lowest level since 2009, according to statements from the Ministry of Agriculture. The number of pigs slaughtered in the first half this year declined 4.8 percent from a year ago, it said. As it takes about four-to-five months for piglets to mature and be ready for slaughter, feed demand will keep rising until at least November, Shanghai JC’s Tu said. Consumption of cooking oil is also expected to rise as food producers buy supplies before the Mid-Autumn Festival in September and the week-long National Day holidays beginning Oct. 1, the China National Grain & Oils Information Center said. The government’s loosening of price controls, signaled by Wilmar’s price increase announcement yesterday, will also buoy the industry’s optimism and boost crushing, Du Weijia, an analyst at Wanda Futures Co., said yesterday. China imposed curbs on prices in September last year in private meetings with top suppliers as part of its measures to curb inflation. Profit Boost CIMB Investment Bank Bhd. raised its 2011-2012 profit forecast for Wilmar by 1 percent after it announced the oil price increase, according to an e-mailed note today. CIMB also increased its forecast on share target price to S$6.25 from S$6.20. The government may have allowed the limited increase to test the market response as crushers are faced with rising costs of raw materials, said Du, who also participated in the survey. Soybeans for November delivery were little changed at $13.7875 a bushel on the Chicago Board of Trade. The most-active contract has gained 35 percent in the past year. To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net

Source