China to halt regular state soy sales from this week

China, the world's top soy buyer, will temporarily halt regular state soy sales from this week as Beijing starts a stockpiling programme for the oilseed, an official think tank said on Monday, to improve margins for soy plants and spur imports.

The suspension is to stop traders and crushers selling their purchases from regular state sales back to the government as Beijing starts buying soybeans from the market at higher prices, said the China National Grain and Oils Information Center (CNGOIC).

The Chinese government will start stockpiling soy and corn from local farmers at higher prices than a year ago, an industry source said last week, a step set to stabilise domestic prices.

Dalian soymeal contracts were trading up more than 1 percent by 0240 GMT on Monday, while soyoil prices rose 0.5 percent.

The price rises are supported by China's soy cancellation and the halt of state sales. Crushers may use possible short supplies of soy as an excuse to start hiking their soy product prices, said Wang Liguo, a Galaxy Futures Co Ltd analyst in Heilongjiang, the country's top soy area.

Heavy crush losses coupled with weak demand have prompted crushers to cancel some 600,000 tonnes of U.S. soybeans over past weeks, said the CNGOIC.

Whenever crushing margins improve or crushers can break-even, they will start to step up imports again, said one trader with a state-owned trading house, adding margins have improved since late last week, but are still negative at about 200 yuan ($32.07) to process one tonne of soy into soymeal and soyoil.

Beijing has sold a total of 3.77 million tonnes of soy from regular state sales, which started from late 2010 as part of efforts to tame food inflation.

($1 = 6.2356 yuan) (Reporting by Niu Shuping and Fayen Wong)

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