BEIJING - China's soybean crushing companies have taken a heavy blow from recent ups and downs in international soybean prices as they wrongly judged the price movements.
Chinese crushers started to stockpile the product when the US Department of Agriculture forecast in September that the country will see its smallest soybean harvest in nine years as the world's largest soybean exporter was hit by the most severe droughts in about 50 years in the summer.
Investors have since bet on the upward trend, pushing soybean prices to a record high before its recent dip as the impact of the drought turned out to be less severe than the previous estimates.
In its monthly report released on Nov 9, the US Department of Agriculture raised its estimate for US soybean production and increased its forecast for global inventories.
Affected by the news, soybean futures prices have headed south on the Chicago Board of Trade.
As of Monday, the price of soybean contracts on the board had nosedived around 20 percent from its high in September.
The slumping prices in turn significantly squeezed profits of Chinese crushers who had stored the product at higher costs earlier for fear of further price gains.
Wang Xiaoyu, deputy secretary general of the Heilongjiang Soybean Association, told reporters that in the current context, crushing one ton of soybean oil would incur losses of 400 yuan for Chinese companies.
He estimated that 90 percent of the companies have halted production since the third quarter.
"Crushers that rely on overseas supply are likely to post losses this year," Zhang Lanlan, an analyst with industry service provider intl.sci99.com, added.
China imports around 80 percent of its total soybean consumption, as foreign soybeans are much cheaper.
Statistics released on Nov 10 from China's customs showed that China imported 48.34 million tons of soybean in the first 10 months of 2012, up 16.6 percent year-on-year.
Chinese producers imported 497 tons and 403 tons of soybean in September and October, respectively, when the prices were sky-high, data showed.
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