April 19, 2006

 

Asia Soybean Outlook: Premiums may fall on ample supply

  

 

Premiums of soybeans delivered to Asia may fall in the week ahead as U.S. soybean futures are largely expected to move lower, despite gains in the last two sessions.

 

CBOT soybean futures have risen in the two trading days so far this week, largely as funds bought because of strength in technical charts.

 

However, U.S.-based analysts said the overall fundamental picture is quite bearish for soy futures, as the market is being flooded by newly harvested soybean crops from Brazil and Argentina, and this has slowed U.S. exports.

 

Demand for soybeans is also slowing in China, after a feverish pace of imports over the past several weeks.

 

A trader at one of China's largest trading houses said crushing margins are falling for most soybean processors in China due to low soymeal prices, and that has slowed soybean imports.

 

"A lot of imported soybeans have flooded the market, which has brought down prices of soybean products," said the trader.

 

The premium for soybeans shipped from Brazil to China is around 132 U.S. cents/bushel above CBOT July contract, compared with 120 cents/bushel above CBOT July contract April 12.

 

China's soybean imports in April are expected around 2.6 million metric tonnes, unchanged from last month.

 

China's soybean imports rose 0.1% on-year in the January to March period to reach 5.41 million metric tonnes, the General Administration of Customs said on its Web site last week.

 

Soybean prices in China's major producing regions fell in the week to Wednesday, pressured by prospective imports and thin local demand.

 

Soymeal prices also continued to fall in China, pressured by ample soybean supplies.

 

There have also been reports of soybean crushers shutting operations in some Chinese provinces, as soybean crush margins are too low for them to sustain operations.

 

Demand for soybeans and soymeal continues to remain dull in South Korea and Taiwan, where no import deals for soybeans or soymeal were reported in the last seven days.

 

Meantime, on Monday, South Korea's state-run Korea Agro-Fisheries Trade Corporation sought 25,000 metric tonnes of non-genetically modified yellow U.S. soybeans in a tender to be concluded on April 27, according to information posted on the company's Web site.

 

The soybean shipment may be shipped from either the U.S. Gulf or Pacific Northwest, and is expected to arrive at Inchon port on Aug. 15.

 

In Japan, traders said not much soybean buying is expected in the week ahead as most traders have already completed buying for May shipment.

 

Traders will likely begin buying soybeans for June shipment in the first week of May.

 

Japan imports around 360,000 tonnes of soybeans every month.

 

A trader in Tokyo said Japanese buyers still prefer to buy U.S. soybeans rather than South American beans, because they deem U.S. soybeans to be of better quality.

 

"Since a lot of the imported soybeans are used to make traditional Japanese preparations such as tofu, the quality of the soybeans is a major factor for importers," the trader said.