August 9, 2006

 

Asia Soybean Outlook: Premiums may fall on US weather

 

 

Premiums for soybeans delivered to Asia may fall in the week ahead on an improving U.S. weather outlook.

 

Analysts said that as the U.S. soybean crop approaches harvest, good weather may boost yields and therefore prices may slide.

 

In Asia, the world's largest soybean importer, China, continues to buy smaller volumes of soybeans than it did early in the year.

 

However, Li Ke, senior analyst at China National Grain and Oils Information Center, or CNGOIC, said China's soybean imports will register a modest 11% on-year rise in the current 2005-06 crop year (October-September) to 31 million metric tonnes.

 

CNGOIC is a major government-backed think-tank focusing on China's agricultural sector.

 

He said the growth in soybean imports isn't as spectacular as in previous years, as Chinese soymeal sales have yet to recover fully from the bird flu impact on feed demand.

 

However, Li Ke thinks that in the 2006-07 crop year, soybean imports may post stronger growth, as demand slowly returns to normal levels.

 

At present, various analysts estimate feed demand to be roughly 20% below normal levels.

 

An analyst at Shanghai JC Intelligence said China's soybean imports in August are likely to be around 2.2 million tonnes.

 

Premiums for soybeans delivered to China from the U.S. are now around 156 U.S. cents/bushel above the Chicago Board of Trade September contract.

 

The analyst said the crush margin for Chinese soybean processors is barely at a break-even point and they are reluctant to store up on more soybeans.

 

"Soybean imports are unlikely to show major increase in volumes in the near term, as crushers struggle with sagging soymeal sales," she said.

 

Many analysts had earlier anticipated that Chinese importers may return to the market in full strength once the U.S. soybean harvesting gets underway and prices fall, but that looks quite unlikely now.

 

There have also been reports of many Chinese importers requesting soybean suppliers in South America and the U.S. to delay shipments to China by up to one month, to avoid putting up with huge soybean stocks.

 

Meantime, CNGOIC said China's soybean production for 2006 is expected to drop 2.7% to 15.9 million tonnes.

 

In China's local markets, some support for soybean prices is slowly emerging from rallying soyoil prices, which are helping to improve crushers' confidence.

 

In fact, an analyst said the crush margin for soybean processors would have been negative had it not been for the high prices of soyoil.

 

However, as Chinese soybean farmers continue to hold around 1.5 million tonnes, or 15% of their old crop, as stocks, no significant gains in price can be expected in the near term.

 

In India, soybean planting is proceeding at a good pace, with 7.7 million hectares planted with soybeans in the June 1-Aug. 4 period compared with 7.4 million hectares in the same period of 2005.

 

Harvesting of soybeans takes place in September and October.