July 12, 2006

 

Asia Soybean Outlook: Weather concern may push premiums up

 

 

Premiums of soybeans delivered to Asia may rise during the week, as Chicago Board of Trade soybean futures are expected to rise amid mounting concerns over adverse weather conditions for the U.S. soybean crop.

 

According to U.S. analysts, CBOT soybean futures are almost totally ignoring demand and supply factors, focusing exclusively on the weather.

 

In the two sessions so far this week, soybean futures on CBOT have ended higher.

 

In Asia, demand from China remains modest, with one trader saying Chinese soybean importers may have booked two cargoes from the Pacific Northwest.

 

Traders said Chinese importers are now quite origin-neutral, since both South American and U.S. soybeans are commanding the same premiums.

 

Chinese traders may speed up booking fresh cargoes in August as the new U.S. soybean crop enters the market, which could lead to a cooling down in premiums.

 

At present, the premium on soybeans delivered to China from the U.S. Gulf is around 130 U.S. cents/bushel above the CBOT September contract.

 

However, a purchasing manager with a Beijing-based grain trading company said imported soybean arrivals in August are expected to be less than 2 million tonnes, as buying activity has been slow since early June.

 

Meanwhile, China's soybean imports in the first half of 2006 rose 17% on year to 14.06 million metric tonnes, the General Administration of Customs said Wednesday. The customs department didn't provide any data for June imports. In China's local markets, soybean prices continued to fall as domestic demand is quite weak, while large stocks of imported soybeans have piled up in Chinese ports. Besides, Chinese farmers continue to hold 20%-30% of the domestic soybean crop as stocks, which means supply will continue to be strong in the near future.

 

In other Asian soybean news, the Kaohsiung branch of the Breakfast Soybean Procurement Association, or BSPA, bought 60,000 tonnes of Brazil-origin soybeans from trading house Cargill in a tender concluded Tuesday.

 

The premium for soybeans delivered to Taiwan from Brazil is currently around 122-123 U.S. cents/bushel above CBOT's November contract.

 

In India, sowing of soybeans continues to progress at a slower pace as scant rains discourage farmers from planting the crop in the main growing province of Madhya Pradesh.

 

The area under soybeans in the June 1-July 7 period is around 1.05 million hectares versus 1.34 million hectares in the year-earlier period.

 

India's June-September monsoon rains, critical for the sustenance of crops, have been erratic so far this year.

 

The soybean crop is expected to be harvested in September.

 

Exports of Indian soymeal in June totaled 108,975 tonnes, down from 115,750 tonnes in June 2005, according to data released by industry lobby group the Solvent Extractors' Association.

 

The SEA didn't give any reasons for the decline in soymeal exports, but industry officials said major buyers in Asia are now looking for supplies from South America, as not much soymeal stocks are left in India, with the peak crushing season over.