BEIJING, June 12 (Reuters) - China's soybean futures hit three-month highs on Monday, as talk that the world's top bean buyer has ramped up checks on imports of genetically modified (GMO) beans, spurred expectations of tighter supplies even as the market remained awash with supplies.
China allows imported beans to be used by crushers to make soymeal for animal feed but none of the beans, all of which are genetically modified, are permitted for use in food products.
Reports over the years have suggested however that several million tonnes of the cheaper imports could be flowing illegally into the food sector.
On Monday, the most-active soybean futures hit 3,996 yuan ($587.82), their highest since March 10, as talk circulated that China's quarantine authority had asked several east coast ports to strictly inspect and punish firms found to be illegally reselling imported beans to food companies.
CHS Inc is being probed as part of the investigation, according to a report by Bloomberg on Friday. Calls to the Chinese unit were directed to the headquarters in the United States.
Prices ended the day at 3,957 yuan ($582.08) a tonne on the Dalian Commodity Exchange, up 1.5 percent on the day. The gains came after prices jumped 1.8 percent on Friday in their biggest daily gain in more than a month.
Open interest - a measure of liquidity in the market - jumped by a quarter on Friday to 287,132 lots, equal to 2.9 million tonnes of beans worth about 11.4 billion yuan. Data for Monday will be released on Tuesday.
"Last week this news came out that the ports were investigating this problem of leaking of imported soybeans," said Liang Yong, an analyst with Galaxy Futures.
"If the trade in imported soybeans is subject to controls, the demand side will all fall on the domestic beans."
China's General Administration of Quality Supervision, Inspection and Quarantine did not immediately respond to a request for comment.
Beijing's efforts to crack down on leaking of imports into the food sector come after China imported record volumes this year and spurred hopes among some investors that the steps may help to erode big domestic oversupply.
Still, a prolonged crackdown will upset major exporting nations including the United States and Brazil.
Imports in the first five months of the year reached 37.12 million tonnes, 20 percent higher than the same period of last year.
China produces around 13 million tonnes of soybeans, all of which go to the food sector to make soymilk, tofu and other products. (Reporting by Dominique Patton; Editing by Subhranshu Sahu)