China imported 1.1m tons of soybeans in 1996, when it was first opened up to the global soybean market, but import volume has since increased 45x to reach 54.8m tons in 2010 (+28.8% yoy). This year COFCO estimates China's reliance on imported soybean will reach a record high (i.e., 77.8% of consumption is met by imports). Currently, China imports soybeans mainly from Brazil and the US (accounting for close to 80% of imports).

China's soybean price is influenced by global prices
As China relies heavily on imported soybeans to meet domestic demand, the domestic soybean price is influenced by global prices. The PRC government also monitors and regulates soybean prices via (1) national reserves procurement and release and (2) setting a floor procurement price for the national reserves.

Eoin Treacy's view Grain and bean prices have pulled back rather sharply over the last week. (Also see David's Comment yesterday on grain prices). At the same time feeder cattle and live hog prices have found support, following a sharp drop, and in the area of their respective 200-day MAs and the upper side of the long-term ranges.

This week's strength in livestock contracts may be in response to somewhat lower grains prices, but considering the fact that they have broken out of such long-term ranges, the potential for a stronger fundamental cause is quite high. At least part of the reason meat prices are high today is because herds were culled over the last 24-month in response first to high feed costs and subsequently to tight credit conditions. (Alse see Comment of the Day on February 2nd).

McDonalds, which is a dividend aristocrat, and Yum Brands which also has an admirable record of increasing its dividend are some of the clear leaders in the meat processing/restaurant sector. Sustained moves below their respective 200-day MAs would be required to begin to question medium-term upside potential.

Sanderson Farms (poultry) has been broadly rangebound for the last five years but bounced impressively from the $40 area this week.

Smithfield Foods (pork) found support in the region of its 200-day MA this week and rallied impressively. A sustained move below this week's low near $18.80 would be required to question medium-term upside potential. Tyson Foods (beef etc.) has a similar pattern.

Texas Roadhouse has paused in the region of $16 and needs to hold in this area if the medium-term uptrend is to remain consistent.

Ruth's Chris Steak House has been forming a base for more than 2 years and has been ranging mostly below $5 since October. It broke emphatically upwards this week and a sustained move below the 200-day MA, currently near $4.75 would be required to check medium-term scope for additional upside.