October 18, 2006

 

Asia Soybean Outlook: Premiums may rise on CBOT gains

 

 

Premiums for soybeans delivered to Asia may rise in the week ahead, as Chicago Board of Trade soybean futures are expected to firm.

 

CBOT soybean futures have been rising because of strong demand for U.S. soybeans, both domestically and overseas. Besides, sharp gains in wheat and corn futures are also price-supportive.

 

In Asia, China's fresh soybean imports slowed in the week to Wednesday, after some sharp gains in earlier weeks.

 

"U.S. soybean is becoming a bit too expensive," said a trader at a major Chinese grains trading company.

 

At present, the premium for soybeans delivered to China from the U.S. is 190 U.S. cents a bushel above the CBOT January contract.

 

An additional factor for the fall in China's fresh soybean imports over the past few days is the imminent availability of new crop in China's local markets, where harvesting is expected to be completed soon, commodities firm JCI Shanghai said.

 

JCI added that the bird flu outbreak earlier this month in China's Inner Mongolia region has also led to a fall in poultry and hog prices in local markets, which may further affect soymeal and soybean prices and demand in the country.

 

However, while there may have been some slowdown in fresh soybean import orders by Chinese traders, traders said arrival of U.S. soybean shipments in Chinese ports has been quite high in October.

 

Traders and analysts said October soybean shipments in China could be around 2.6 million metric tonnes.

 

However, since fresh soybean import bookings have started slowing down a little, soybean shipments in November may be slightly lower at around 2.3 million tonnes.

 

China's soybean imports have risen 8.8% on year in January-to-September to 21.25 million tonnes, preliminary data provided by the General Administration of Customs last week showed.

 

In September, soybean imports were at 1.79 million tonnes, it said.

 

Traders also said China's soybean import costs may rise further as freight costs to most Asian destinations have been firming in recent weeks.

 

As demand for coal rises during the winter months in the Northern Hemisphere for heating purposes, freight costs often go up as a number of vessels haul coal to various destinations.

 

At present, the U.S. Gulf-China spot ocean freight rate for panamax-sized vessels is around US$50/tonne.

 

In other news, Hong Kong-based trading firm Noble Group Ltd. (N21.SG) said Monday that it has signed a pact to buy two soybean processing facilities in China for around USUS$18 million, in a move that will more than quadruple its annual refined vegetable oil output there.

 

The two plants will allow Noble to crush 3 million tonnes of soybeans in China, up from 1 million tonnes currently, and produce 915,000 tonnes of refined vegetable oil a year there, compared with 220,000 tonnes now.

 

"This is a significant acquisition that will raise our market share to about 10% of the total crush capacity for imported beans in China," chief operating officer Ricardo Leiman told Dow Jones Newswires.