November 8, 2006

 

Asia Soybean Outlook: Premiums may rise on buoyant futures

 

  

Premiums of soybeans delivered to Asia may rise in the week ahead, as Chicago Board of Trade soybean futures are likely to gain further.

 

CBOT soybean futures have been on the rise for the past several days, largely underpinned by a strong long-term demand outlook for soybeans and a feeling among traders that soybeans are still underpriced compared to corn.

 

Both corn and soybean are major ingredients in animal feed products.

 

China, the world's largest soybean importer, remains a modest soybean importer, having placed orders for around three-to-five cargoes last week.

 

An analyst at JCI Shanghai, a commodities analysis firm, said premiums for soybeans delivered to Chinese buyers are on the rise.

 

She said premiums for soybeans delivered to China may rise to 175-185 U.S. cents a bushel to the CBOT January contract this week compared with 170-180 cents/bushel in the previous week.

 

Traders said rising premiums and the ongoing soybean harvest in China may keep fresh soybean import volumes moderate over the next several days.

 

JCI analysts estimate soybean import arrivals in Chinese ports in November to total 2.5 million-2.7 million tonnes. They expect import arrivals in December to be around 2.3 million-2.4 million tonnes.

 

Meantime, farm sector think-tank China National Grain and Oil Information Center this week said 2006 soybean output in China may fall 5.2% on year to 15.5 million tonnes.

 

In China's local markets, soybean prices are up due to rising soyoil prices and higher prices of imported soybeans.

 

Imported soybean prices are expected to rise to RMB2,850-RMB2,900/tonne in late November from RMB2,650-RMB2,750/tonne currently, according to local traders.

 

Traders in China see no scope for reversal in gains in local soybean prices unless CBOT soybean futures take a sharp fall.

 

In India, despite the ongoing harvest of soybeans, soymeal exports have slowed due to an acute congestion at the western Indian Kandla port, which handles 60% of soymeal shipments from India.

 

There is a risk that deliveries of more than 800,000 tonnes to Southeast Asian buyers over the next three months will be delayed, an industry official said.

 

Large volumes of imported wheat and fertilizer are being unloaded at the Kandla port at the moment, resulting in a congestion, the official said.

 

"So far India has contracted close to a million tonnes of soymeal exports in the current marketing year (that began October), and more than 70% of the deliveries have to take place between November and December," Davish Jain, chairman of the Central Organization of Oil Industry and Trade, a lobby group of local traders and exporters, told Dow Jones Newswires.

 

However, despite the congestion at Kandla, India exported 290,154 tonnes of soymeal in October, up from 198,767 tonnes a year earlier, the Soybean Processors Association of India, or SOPA, said in a statement Tuesday.