September 13, 2006

Asia Soybean Outlook: Premiums may rise; demand falls

 

Premiums for soybeans delivered to Asia may increase in the week ahead, with freight continuing to rise, despite soybean futures on Chicago Board of Trade remaining entrenched in a bearish cycle, analysts said.

 

The U.S. looks set to harvest a good soybean crop, while demand has shown a clear trend of picking up globally, according to the monthly supply/demand report by the U.S Department of Agriculture, released Tuesday.

 

The report also said that soybean production was reduced for China based on lower yield prospects.

 

Nevertheless, demand from China, the world's biggest soybean importer, is expected to decline in September, said an analyst with commodities analysis firm JC Intelligence Shanghai.

 

"The volume of import arrivals is expected to be around 2.0 million-2.2 million metric tonnes, compared with 3.02 million tonnes in August," said the analyst.

 

"Importers booked 5-6 cargoes of soybeans last week and 4 for this week," she added.

 

At present, premiums for soybeans delivered to China from the U.S. are 190-195 U.S. cents a bushel above CBOT's November contract, up 5-10 cents from last Wednesday, mainly due to hiking freight costs, said the analyst.

 

Currently, freight costs for the U.S.gulf/China route are about $51-$52/tonne, up from $49-$51/tonne last week. The trend of looking up will last for a couple of months, according to local traders.

 

Prices for soybeans imported from the U.S. were quoted around RMB2,600 this week, up from RMB2,550 a week earlier, traders said.

 

Domestic demand declined as crushing companies in China's northeast halted production for inspections and repairs around this time of the year, local analysts said.

 

In local markets, soybean prices remained flat last week, with demand and supply largely in balance.

 

Chinese analysts expect trading to be relatively quiet in September as crushers and feed makers aren't willing to make large purchases ahead of the new harvest of soybeans.

 

Harvesting of the crop will begin late October.

 

Chinese grain traders have become more bullish on soybeans lately, with overstocking showing signs of easing and import arrivals expected to decline, according to a weekly survey by the China National Grains and Oils Information Center released Friday.

 

Traders are also becoming more positive about soymeal, as increases in prices for pork and poultry have triggered a rebound in demand for feed, the government backed think tank said.

 

In India, periods of rain, showers and thunderstorms reported in southern and eastern portions, causing flooding. Concerns for quality problems may be increasing.

 

The area covered by the soybean crop as of Sept. 7 is estimated at 8.0 million hectares, up 7.7 million hectares from a year earlier.

 

Premiums for soybeans delivered to Japan from the U.S. remain unchanged at 260 cents/bushel above CBOT November contract this week, according to a Tokyo-based trader.