September 20, 2006

 

Asia Soybean Outlook: Premiums may rise on freight costs

 

 

Premiums for soybeans delivered to Asia could continue to increase in the week ahead, with freight costs expected to rise, while soybean futures on the Chicago Board of Trading may retreat from recent gains, analysts said.

 

The export report by the U.S. Department of Agriculture released Sept. 14 indicated a sharp increase in China's purchases of the U.S. soybeans in the first week of September. However, import arrivals in Chinese ports will fall this month and aren't expected to rise until October, according to analysts.

 

Premiums for soybeans delivered to China from the U.S. are still showing signs of rising due to higher freight costs, said an analyst with commodities analysis firm JC Intelligence Shanghai.

 

"Currently, premiums are around 195 U.S. cents a bushel above CBOT's November contract, up 4-5 cents from last Wednesday," the analyst added. "Importers booked 6 cargoes of soybeans last week and 6 for this week," she said.

 

Freight costs for the U.S. gulf-China route were steady around $50 a tonne at the start of the week from $49-$51/tonne last week and rebounded to $51-$52/tonne Wednesday. The upward trendwill last for a couple of months, according to local traders.

 

Prices for soybeans imported from the U.S. were quoted around RMB2,625 this week, up from RMB2,600 a week earlier, traders said.

 

In local markets, demand remained sluggish as crushing companies are waiting for the new harvest. Domestic prices held stable at around RMB2,400/tonne last week, analysts said.

 

"On one hand, local crushing companies are reluctant to make large purchases before the new harvest of soybeans (in October and November)," said Zhang Liwei, an analyst at the China National Grain & Oils Information Center.

 

"On the other, supply is declining because farmers have sold most of their stocks," he added.

 

Harvesting of the new crop will begin late October.

 

Demand is expected to rebound later this year, as consumption of pork and poultry usually pick up in the fall and winter, analysts said.

 

"Now livestock farmers can make comfortable profits with prices for pork and poultry continuing to increase," said the Shanghai-based analyst.

 

"Moreover, they will need to increase production from October, so as to meet demand from the Chinese New Year, the most important traditional festival in China," she added.

 

Soybean imports will also rebound later this year, as profits of crushing companies are recovering, local traders said in a weekly survey by the China National Grains and Oils Information Center released last Friday.

 

In other demand news, South Korea has issued a tender to buy 50,000 tonnes of non-genetically modified U.S. No. 1 soybeans Sept. 29, an official at the state-run Korea Agro-Fisheries Trade Corp. said on Wednesday.

 

Taiwan's Breakfast Soybean Procurement Association, or BSPA, bought 60,000 tonnes of U.S-origin soybeans from trading house Cargill in a tender concluded Tuesday, an association official said.

 

South Korea's Korea Feed Association, or KFA, bought 117,500 metric tonnes of soymeal in a tender Tuesday, an official with the association said. The purchase included 52,500 tonnes of U.S. soymeal and 65,000 tonnes of soymeal from India.