October 5, 2006

 

Asia Soybean Outlook: Premiums stable, market sentiment mixed

 

 

Premiums for soybeans delivered to Asia will probably hold stable in the week ahead amid mixed market sentiment, while soybean futures on the Chicago Board of Trade are not expected to rise substantially, under pressure from a bearish harvest outlook, analysts said.

 

The U.S. Department of Agriculture reported Monday a pickup in the harvest pace of U.S. soybeans, adding to the bearish outlook.

 

Sept. 28, the USDA said net sales to China totaled 241,300 metric tonnes in the week ended Sept. 21, compared with 326,200 tonnes a week earlier.

 

Private exporters reported the sale of 116,000 tonnes of U.S. soybeans to China for delivery in the 2006-07 marketing year, according to the USDA Wednesday.

 

China is observing its National Day holiday all this week.

 

Premiums for soybeans delivered to China from the U.S. were around 195 U.S. cents a bushel above CBOT's November contract last week, according to local traders.

 

Freight costs for the U.S. Gulf/China route were around US$50-US$51/tonne last week, while prices for soybeans imported from the U.S. were quoted around RMB2,600/tonne.

 

In local markets, demand is expected to rebound after the week-long National Day holidays. But the expected good harvest of U.S. soybeans and recent losses in international crude oil prices will weigh on soybean prices, said a trader with China Grains & Oils Group Feed Corp.

 

"Motivated by steady rises in prices of pork and poultry lately, livestock farmers are expected to buy more feed to improve production after the National Day holidays, increasing demand for soybeans," he said.

 

However, "the better-than-expected harvesting progress of soybeans in the U.S. and recent losses in international crude oil prices showed downside potential," he added.

 

Moreover, recent outbreaks of bird flu added to the uncertainty.

 

"How the market will respond to two outbreaks of bird flu reported this week is still unknown." the trader added.

 

Import arrivals at Chinese ports totaled around 1.7 million to 1.8 million tonnes in September and may rebound to 2.5 million tonnes in October, with demand recovering, said local analysts.

 

In other markets, premiums for soybeans delivered to Japan from the U.S. are around 260-270 U.S. cents a bushel above CBOT's November contract this week, according to a Tokyo-based trader.

 

He said Japan's imports are declining gradually, as its crushing capacity is shrinking due to competition from China, which enjoys lower production costs.

 

Premiums for soybeans delivered to Taiwan from the U.S. are around 220 U.S. cents a bushel above CBOT's November contract this week, little changed from last week, said a Taipei-based trader, adding total imports for this year will probably reach 2.2 million to 2.3 million tonnes.

 

South Korea has reissued a tender to buy 50,000 tonnes of nongenetically modified U.S. soybeans, after passing on the tender last week due to a lack of bidders, an industry official said early this week.

 

The USDA said Monday that U.S. private exporters reported export sales of 110,000 tonnes of soybeans for delivery to South Korea during the 2006-07 marketing year