April 23, 2007

 

Asia Grain Outlook on Monday: Wheat, soybeans may rise; CBOT, freight

 

 

Premiums of wheat and soybeans delivered to Asia may rise in the week ahead, tracking likely gains in Chicago Board of Trade futures and rising ocean freight costs.

 

For wheat, damage caused to the U.S. wheat crop by recent freezing weather continues to support prices, while the likelihood of drier weather ahead in the U.S. is bearish news for corn and bullish news for soybeans.

 

Drier weather will enable farmers to go ahead with corn plantings as scheduled, in what is expected to be historically high U.S. corn acreage. Higher corn plantings will eat into soybean acreage, supporting prices of soybeans.

 

Rising ocean freight rates are making imported grains more expensive in Asia, though overall import volumes are unlikely to fall because of this.

 

"Freight costs have gone up sharply over the last month. But can people really delay purchasing shipments because of this? Not in most cases," said a trader with a multinational grain trading firm in Singapore.

 

For shipments coming into Southeast Asia from the U.S., spot rates for panamax cargoes have gone up by US$10-US$12 a metric tonne in the last month, to around US$65/tonne.

 

Ocean freight costs for the U.S. Gulf-Japan route have risen US$10-US$12/tonne over the last month to around US$70/tonne.

 

In other news, China's fresh soybean imports are likely to weaken further in the week ahead, after rather frugal purchases in the past week.

 

There are two major reasons, according to commodity analysts JCI Shanghai: the increase in soybean premiums delivered from South America to China, and falling soymeal prices in China damping buyers' interest in importing more soybeans.

 

Last week, Chinese traders booked at most four soybean cargoes, mostly from the U.S.

 

JCI added that the premium for soybeans delivered to China from the U.S. is around 146-152 U.S. cents/bushel to the CBOT July contract, for shipment in May and June. Premiums for Argentine and Brazil soybeans are at a much higher 160-165 cents/bushel and 185-190 cents/bushel, respectively, for the CBOT July contract.

 

Meanwhile, large soybean imports by Chinese traders over the past several weeks have resulted in large stocks of both soybeans and soymeal with domestic crushing plants as well as in Chinese ports.

 

Soymeal stocks in China's coastal areas total around 2.6 million to 2.7 million tonnes, while soybean stocks in the main Chinese ports total around 3.1 million tonnes.