April 5, 2006

 

Asia Soybean Outlook: Premiums to fall tracking CBOT trend

 

 

Premiums of soybeans delivered to Asia may continue to slide in the week ahead, tracking losses in Chicago Board of Trade soybean futures, traders said.

 

CBOT soybean futures, which have been lower this week, are expected to keep falling as the South American soybean harvest picks up pace, reducing U.S. soybean exports.

 

In the meantime, China continues to remain the leading Asian soybean buyer, with most analysts estimating that March imports may have exceeded 2.6 million tonnes.

 

The pace of April imports will match or even exceed March imports, analysts said.

 

While an analyst in JCI Shanghai said April imports could reach 2.6 million tonnes, another analyst at a major Chinese grains buying company said imports could hit 3.2 million tonnes in April.

 

"The cost of imported soybeans is still lower than domestic soybean prices, so there is a very good rationale for continued imports," an analyst in Beijing said.

 

The analyst said that bulk of the imports are now coming from South America as soybean prices are lower there in comparison with the U.S.

 

Traders also said the declining trend in CBOT soybean futures will likely reduce the import cost of soybeans even further.

 

U.S.-based analysts said that South American soybeans may continue to sell at cheaper prices, compared to U.S. soybeans, until mid-May.

 

At present, the premium for soybeans delivered to China from Brazil is around 120 U.S. cents/bushel above the CBOT July contract.

 

In China's local markets, soybean prices are mostly stable, though crushers are still reluctant to buy too much, as they see no substantial increase of local feed demand anytime soon.

 

Although no bird flu outbreak in poultry has been reported in China since the end of February, local crushers are still buying only enough soybeans to meet their immediate needs.

 

In Japan, however, soybean imports are quite sluggish as traders find premiums of imported soybeans too high.

 

"I don't expect soybean imports by Japanese buyers to recover anytime soon as U.S. and Brazilian sorts are too expensive," said a Tokyo-based trader.

 

"Traders right now are content to wait and watch and buy only when prices come down further," added the trader.

 

Demand for soybeans and soymeal remained quite weak in Taiwan and South Korea over the past seven days, with no indications of any improvement in demand over the week.

 

The only deal last week was Taiwan Sugar Corp buying 12,000 tonnes of U.S.-origin soybeans, from trading house Mitsui, in a tender.

 

Meanwhile, soymeal demand in Asia is expected to remain stable over the next several months as bird flu cases are receding in many nations, such as China and Thailand.

 

Traders said demand for soymeal is in fact rising steadily in Vietnam as the country's catfish exports have grown rapidly over the last several months.

 

In India and Malaysia, however, prospects for soymeal sales in the near-term remain quite bleak, as both countries struggle with recent bird flu outbreaks.

 

In Malaysia, soymeal demand in March fell by almost 20% from year-ago levels, while in India traders said poultry farm owners have sharply cut back fresh orders for soymeal as poultry sales have been hit badly by bird flu outbreak since mid-February.