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Issue |
Industry Focus
Chinese Rapeseed Crushers Await Substantial Drops in Seed Prices
Despite a drop of RMB40-60/MT in Chinese rapeseed prices over the past two weeks in the eastern and central producing areas, current rapeseed prices at the range of RMB2,360-2,560/MT in the areas are still thought to be rather high by the local crushers. Grade 2 rape oil prices witnessed another sharp decrease of around RMB100-200/MT as well as drops in rape meal prices in different degree in these areas during the period. Given plunge in rape oil and rape meal prices, Chinese crushers are currently suffering poor or partly negative crush margins especially in eastern China based on current prices for rapeseed, rape meal and rape oil. They are expected to enjoy moderate crush margins by processing rapeseed only when rapeseed prices drop substantially by more than RMB200/MT from current levels.
Local Grade 2 rape oil prices has significantly dropped to RMB5,900-6,050/MT from the early July's high levels of above RMB6,100/MT along with decreases of RMB20-100/MT in rape meal prices in eastern China. And rapeseed prices have been mostly at the level of RMB2,500-2,600/MT in eastern areas in spite of recent drops.
In eastern China's Jiangsu Province where Grade 2 rape oil and rape meal prices are generally traded at RMB5,950/MT and RMB1,040/MT, respectively, while rapeseeds are mostly procured at the prices of RMB2,540/MT, the local crushers can only acquire crush margins at around RMB18 for each MT of rapeseeds processed. (The calculation is based on oil and meal extraction rates of 34% and 63%, respectively.)
In the neighboring Anhui Province, the local crushers now only get negative crush margins of RMB46 for each MT of rapeseed processed, seeing that the general prices for rape oil and rape meal are respectively lowered to the prices of RMB5,900/MT and RMB980/MT along with rapeseed prices at RMB2,500/MT. (The calculation is based on oil and meal rate of 33% and 64%, respectively)
With anticipation that quotes for rapeoil would possibly drop to the levels of RMB5,800-5,850/MT, lagged by the prices of RMB5,670-5,750/MT for similar grade of soyoil in eastern China, and rapemeal prices falling to RMB950-1,000/MT in the coming future with consideration of the downward trend, local crushers in eastern China would suffer negative crush margins of 40-90 for each MT of rapeseed crushed.
Confronted with narrow or negative crush margins from crushing rapeseed, some large-sized crushers are more interested in crushing soybeans for fairly profitable crush margins. In southern Jiangsu where Grade 2 soyoil and soymeal prices were mostly quoted at the prices of RMB5,750/MT and RMB2,170/MT, respectively, and import costs of soybeans at RMB2,400-2,500/MT, the big-scale crushers can achieve crush margins of RMB157-257 for each MT of soybeans processed, largely exceeding crush margins got from crushing rapeseeds. (The calculation is based on oil and meal extraction rates of 18.5% and 78%, respectively.)
Therefore, eastern crushers are not willing to procure large amount of rapeseed at the present level in view of negative crush margins until prices for rapeseed declines to their acceptable level of around RMB2,300-2,350/MT at which they can generate moderate crush margins.
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