July 26, 2006

 

Asia Soybean Outlook: Premiums may rise on US weather woes

 

  

Premiums for soybeans delivered to Asia may rise in the week ahead, led by expected gains in Chicago Board of Trade soybean futures as current hot and dry weather conditions seem unfavorable for the U.S. soybean crop.

 

CBOT soybean futures have posted gains in the week so far.

 

In Asia, demand from China, the world's biggest soybean importer, continues to remain sluggish as large domestic stocks at crushing plants and ports dissuade importers from booking fresh shipments.

 

A trader in Beijing said many importers have over the past few weeks postponed arrivals of shipments into China.

 

"Many July soybean shipments from South America and the U.S. may now only arrive in August," said the trader.

 

Traders said that while there seemed to be some signs earlier of soybean demand reviving in early August, at present, the prospects for any pickup in imports seem dull for the next 3-4 weeks.

 

"The concern seems to be that low demand for soymeal is affecting crush margins, so soybean offtake isn't up to the mark," said a Singapore-based analyst.

 

Soymeal demand in China has been subdued through the year so far, as concerns over bird flu have hit poultry output.

 

At present, the premium for soybeans delivered to China from Brazil remains around 130 U.S. cents above the CBOT November contract.

 

Meanwhile, traders said the ocean freight cost is "comfortable" for most Chinese buyers, at around US$40/tonne for panamax-sized cargoes in the U.S. Gulf-China route.

 

In China's local markets, soybean prices continue to fall largely due to an oversupply of soybeans and poor offtake of soymeal.

 

Analysts said demand for soymeal remains weak, which has prompted major local crushers to curtail their soybean purchases.

 

In addition, analysts warned that the overstocking situation for soybeans is showing no signs of easing, as Chinese farmers continue to hold large quantities of soybeans as stocks.

 

In the latest statistics released by China's General Administration of Customs, soybean import arrivals in June totaled 3.67 million tonnes, up 44.4% from the same month last year.

 

January-June imports this year totaled 14 million tonnes, a 17% rise over the corresponding period last year.

 

In other major soybean importing nations such as Taiwan and South Korea, no import deals for soybeans or soymeal were reported over the past seven days.

 

In South Korea, the Korea Feed Association had floated a tender to purchase 55,000 tonnes of soymeal, but the association rejected all the bids when the tender concluded Tuesday.

 

An association official said a fresh tender may be floated later for purchasing soymeal, but gave no timeframe.

 

In India, soybean sowing has been progressing at a fast clip, with around 6.7 million hectares sown with soybeans in the June 1-July 21 period compared with 6.3 million hectares in the same period last year.

 

One government official told Dow Jones Newswires that trends so far indicate that India may harvest a bumper soybean crop this calendar year. Harvesting begins in September.