June 21, 2006

 

Asia Soybean Outlook: Premiums may fall; good U.S. weather 

 

 

Premiums for soybeans delivered to Asia are likely to fall in the week ahead as weather conditions remain good for the U.S. soybean crop.

 

Over the past seven sessions, CBOT soy futures were largely lower, with marginal gains in one or two sessions.

 

However, some U.S. analysts believe soy futures may get a boost around June 30, when a U.S. Department of Agriculture report may report a drop in the area planted with soybeans in the U.S.

 

In Asia, demand from the world's biggest soybean importer, China, continues to remain lackluster.

 

China has slowed its soybean imports for the past several weeks, after frenetic buying from February to early May.

 

An analyst with a large grains buying firm in Beijing said China's domestic soybean stocks have swelled to 3 million metric tonnes, which has curbed appetite for imports among Chinese traders.

 

He said the total soybean imports in June will be a modest 2.3 million tonnes, while July imports may be even lower at 2 million tonnes.

 

Traders said they have heard of only one cargo of soybean being booked by a Chinese trader for July shipment in the past seven days. They couldn't tell the tonnage of the cargo.

 

Traders added that Chinese buyers are unlikely to enter the market in earnest before August, when the harvesting of the new U.S. soybean crop gathers pace.

 

Meantime, the premium for U.S. soybeans delivered to China remains unchanged from last Wednesday, at 130 U.S. cents/bushel above the CBOT September contract.

 

Despite the lull in Chinese soybean imports in the last few weeks, Hamburg-based edible oil trade portal, oilworld.com said China's April-June soybean imports will reach a record 7.4 million tonnes, 12% higher from the same period last year.

 

In other news, U.S. agribusiness company Cargill Inc. opened its biggest soybean crushing facility in China - also its second-largest in the world - this week.

 

Cargill's new crushing plant, based in Nantong city in Jiangsu province, has a capacity of 5,000 tonnes a day.

 

The US$60 million plant is located near the mouth of the Yangtze River, where soy products could be easily transported upstream from Shanghai to the country's central provinces.

 

In China's local markets, soybean prices are little changed, as trading volumes remain low amid weak demand.

 

Soybean crushers are reluctant to buy much soybeans since the country has already built up a stockpile of soymeal and soy oil.

 

Besides, large quantities of imported soybeans lying in Chinese ports continue to be priced lower than local produce.

 

In rest of Asia, soybean imports were quite dull, with only reported deal last week of South Korea's CJ Corp. buying 55,000 tonnes of Brazil-origin soybeans from Mitsubishi in private negotiations.

 

In India, the outlook for the soybean crop looks quite grim at present, since monsoon rains have so far eluded the soybean growing central province of Madhya Pradesh.

 

Industry officials said that if adequate rains don't take place over the next 10 days, there could be a major reduction in India's soybean output this year.

 

Sowing for the soybean crop was expected to be largely completed by end of this month, which now looks quite impossible.