February 8, 2006

 

Asia Soybean Outlook: Premiums to ease as demand slows

 

 

Premiums for soybeans delivered to Asia may ease further as demand slows after the Lunar New Year festivities in several countries, traders said Wednesday.

 

"Most Asian markets were closed for Lunar New Year. With traders returning this week, we expect some renewed activity in the market, but demand will generally start slowing," a trader in Singapore said.

 

The bearish supply and demand outlook in the U.S and a general correction in global commodity markets will also weigh on sentiment as will lower ocean freight rates amid declining Chinese iron ore shipments and overcapacity in the freight industry.

 

Analysts forecast the U.S. government would report Thursday, 2005-06 soybean ending stocks at 527 million bushels, just below the U.S. record carryover of 536 million bushels set in 1985-86. Analysts' estimates for USDA's end-stocks estimate this month ranged from 452 million bushels to 555 million bushels.

 

The USDA on Jan. 12 forecast 2005-06 U.S. soybean ending stocks at 505 million bushels; U.S. soybean ending stocks in 2004-05 totaled 256 million bushels. The U.S. marketing year for soybeans runs from Sept. 1 through Aug. 31.

 

Meanwhile, two separate government estimates earlier this week put Brazil's 2005-06 soy crop at more than 58 million metric tonnes.

 

Brazilian farm research and consulting firm AgroConsult had forecast a 56.3- million-tonne crop in 2005-06.

 

U.S. soybean futures have been facing selling pressure in the last two sessions after speculative sales triggered sell stops following losses in other commodity markets.

 

CBOT South American soybean futures also ended lower Tuesday with the March futures contract settling down 13 cents at $5.95 per bushel amid reports of favorable weather.

 

In Argentina's key soy producing areas of Cordoba, northern Buenos Aires and Santa Fe, near-term forecasts called for increasing chances for showers and cooler temperatures, according to Meteorlogix weather service.

 

On the demand side, China has been a large importer of soybeans in the early part of January, but imports are expected to slow after the new year festivities ended last week.

 

According to an analyst in Shanghai, China may have bought around 1.6-1.8 million tonnes of soybeans in January, but imports in February may at best be flat or even slightly lower around 1.5 million tonnes.

 

But Chinese imports could rise again in March, once the South American crop hits the market.

 

Traders said China is currently buying just enough to meet immediate requirements while waiting for Brazilian and Argentine soybeans to reach the market.

 

In other news, Indian soymeal exports in January 2006 rose sharply to 488,758 tonnes from 176,023 tonnes during the same period last year, according to data compiled by Soybean Processors Association of India.

 

Total export of soybean meal from April 2005 to January 2006 showed a growth of 51% on year to at 2.27 million tonnes, the Association said.

 

There were no big trades reported in the region last week because of the Lunar New Year holidays.