November 19, 2007

 

Asia Grain Outlook on Monday: Soybean prices may rise on China demand

 

 

Asian buyers will likely keep paying higher prices for soybeans, as Chicago Board of Trade soybean futures are expected to remain high this week.

 

A spurt in Chinese soybean demand has been the strongest support for CBOT soybean futures and there's no sign it will abate anytime soon.

 

China's soybean crop yield has fallen 20.2% this year, as production was hit by drought and floods, while vegetable oil prices are surging.

 

Chinese farmers are now holding on to their soybean stocks on expectations prices will rise further.

 

Meanwhile, the Chinese government has also jumped into the import fray, with commodity analysis firm Shanghai JCI reporting that it may have purchased around 400,000 metric tonnes of soyoil and up to 700,000 tonnes of soybeans over the past several weeks, for shipment between December and March.

 

The government is keen on boosting domestic reserves of both soybeans and soyoil and calming down domestic prices.

 

Overall, last week, around 14-16 cargoes of soybeans were bought by Chinese companies compared with 11 in the preceding week.

 

A trader at a state-run Chinese grain trading company said most of the soybeans being purchased were from the U.S. and were scheduled to reach China in December and January.

 

Premiums for soybeans delivered to China from the U.S. are currently at 350-380 U.S. cents/bushel to the CBOT January contract.

 

In other news, sowing of wheat in India so far has been lagging on year, at 3.47 million hectares in the Oct. 1-Nov. 16 period compared with 5.27 million hectares in the same period last year.

 

The country's oilseeds sowing was also down from last year, with 4.72 million hectares sown in the Oct. 1-Nov. 16 period compared with 6.81 million hectares during the same period last year.

 

If the situation continues, India may have to step up its imports of edible oils and wheat, which could be bullish for both soybeans and wheat prices globally. The government will also be quite nervous about a fall in output of these two crops, as it can stoke inflation, which is currently under control.

 

However, it's early days still for India's winter crop sowing, which will likely conclude in January.