March 8, 2006

 

Asia Soybean Outlook: Premiums may fall; bird flu worries

 

 

Asian soybean premiums are expected to fall in the coming week, as U.S. futures remain pressured on bird flu concerns in Europe and Asia.

 

Soybean futures on the Chicago Board of Trade ended most of the week to Tuesday lower, led by speculative sales, bird flu worries and pressure stemming from a building harvest of a large South American soybean crop.

 

Sporadic bird flu news from around the world has continued to pour in. Cases of the virus have been reported in India, France, Poland and Austria.

 

The Associated Press reported that Hong Kong will reduce by a third its local chicken population, control imports of live birds and limit new licenses for poultry farms.

 

However, China's soybean imports have been quite brisk over the past several days. A Shanghai-based analyst said March soybean imports may be around 2.6 million metric tonnes compared with earlier estimates of 2.2 million tonnes.

 

"The bird flu scare is subsiding in the absence of any fresh outbreaks in the poultry population (in China). While poultry breeding isn't up to normal levels yet, soybean importers seem bullish on demand for both soybeans and meal," said the analyst.

 

Analysts said premiums for soybeans delivered from the U.S. Gulf to China are at present around 145 U.S. cents a bushel over the CBOT July contract for prompt shipment, compared with around 150 cents/bu last week.

 

However, in China's local markets, soybean prices fell as farmers have started selling their stocks for cash ahead of the spring seeding season.

 

Analysts also added that farmers don't seem too optimistic about a rise in soybean prices in the near future.

 

Interestingly, so far this year, international soy buyers, the biggest of which is China, aren't shifting entirely to buying South American soybeans, ditching U.S. soybeans, as it happens every year in February and March when harvesting begins for the South American soybean crop.

 

A trader in China said premiums for Brazilian soybeans shipped to China are around 105 cents/bushel while Chinese buyers are willing to pay only around 100 cents/bushel.

 

An appreciating Brazilian real versus the dollar and firm freight costs have made Brazilian soybeans less competitive so far this year.

 

In the soymeal trade, South Korean importers said they are well-covered until June and are waiting for soymeal prices to fall further as the bird flu scourge continues unabated.

 

Besides, while South Korean buyers were earlier buying a lot of India-origin soymeal, they have now switched to South American soymeal, which some traders say are cheaper than the Indian sorts.

 

"The South American soybean crop is being harvested, so obviously supply is much higher and prices lower than Indian meal, as the Indian soybean crop was harvested in October-November last year," said a South Korean buyer.

 

Meantime, a report by the U.S. Department of Agriculture has said South Korea's soybean imports will remain unchanged at 1.3 million tonnes in both the marketing years of 2005-06 and 2006-07.

 

The soybean marketing year runs from October to September.

 

The report also added that South Korea is gradually importing more soybeans from South America compared with the U.S.