June 14, 2006

 

Asia Soybean Outlook: Premiums may fall on weather, energy

  

 

Premiums for soybeans delivered to Asia may fall in the week ahead, on better weather conditions for the U.S. soy crop and losses in energy futures.

 

CBOT soy futures were mostly lower in the previous five sessions on largely favorable weather forecast for the U.S. crop and weakness in energy futures.

 

In Asia, demand remains dull, with Chinese demand remaining sluggish while no fresh import deals were reported from other big buyers such as Taiwan and South Korea.

 

According to a Shanghai-based trader, China's massive soybean imports from February to early May led to swollen domestic stocks.

 

"Most soybean processors will like to go through the current stock before seeking more imported soybeans," said the trader.

 

The trader said an import shipment in June is expected to be a whopping 3.5 million tonnes.

 

China's soybean imports have risen 9.6% on year in the January-May period to 10.39 million tonnes, the General Administration of Customs said on its Web site this week.

 

Soybean imports in May were at 2.41 million tonnes, the data showed.

 

Traders said China's exporters may increase the pace of imports from the first week of July, if CBOT soy futures come down enough.

 

Traders currently find the premiums for soybeans delivered from Brazil or the U.S. to China, at 140 U.S. cents above CBOT July contract, too high for their liking.

 

Meanwhile, if premiums don't fall enough, exporters may continue to use existing domestic stocks.

 

"Traders are in no hurry to step up imports. Unless the import margins are high enough, exporters are willing to wait," said the Shanghai-based trader.

 

In China's local markets, soybean prices continue to fall, albeit at a slow pace, largely tracking weakness in CBOT soy futures, while domestic demand remains stagnant.

 

However, analysts believe that local prices have fallen far enough and have factored in the huge arrivals of imported soybeans, so the scope for a further sharp fall in prices is limited in the near term.

 

According to trade news portal, chinafeedonline.com, China's soymeal prices continue to remain weak, pressured by large supplies.

 

The portal notes that some soy processing companies are actively cutting soymeal prices to attract more business, so any chances of prices improving in June remains quite remote.

 

Meantime, in India, monsoon rains have weakened considerably over the past few days and revival of rains isn't expected before June 17. This can delay sowing of oilseeds crops, such as soybean and peanuts, leading to rise in soybean and soy oil prices in local markets.

 

"Sowing of oilseeds, such as peanuts and soybean, which need much water may have to wait for the time being in areas so far not covered by the monsoon," L.S. Rathore, a scientist with the National Center for Medium Range Weather Forecasting, a government-run agency, told Dow Jones Newswires.

 

However, he added that there's no need to worry about the fate of the oilseeds crop, since there is enough time left for farmers to complete sowing.

 

Generally the monsoon covers the central province of Madhya Pradesh, the key soybean-growing region, by June 15. This is unlikely to happen now.

 

India's soybean crop, sown from June to August, is totally dependent on the seasonal monsoon rains for sustenance.