January 25, 2006

 

Asia Soybean Outlook: Premiums to fall on freight, futures

 

 

Premiums for soybeans delivered to Asia may soften on falling spot ocean freight rates, weaker Brazilian soybean prices and an uncertain U.S. soybean futures outlook.

 

Spot ocean freight rates have been easing over the past few weeks, and are likely to continue falling because of declining Chinese iron ore shipments and overcapacity in the freight industry.

 

U.S. soybean futures have been mixed in the week to Tuesday, and contracts may fall over the week as South American weather is turning favorable for soybean crops.

 

In Brazil, a major South American soybean producer, soybean prices were weaker in the week to Tuesday, largely because of good weather in the country's main soybean producing provinces.

 

On the demand side, China has been a large importer of soybeans over the past few weeks, as international prices have weakened.

 

However, soybean imports by Chinese companies may slow until Feb. 3, as many traders will take a break for the Lunar New Year, Chinese analysts said.

 

However, China's imports are likely to pick up in February, when traders will return to the market.

 

"Large (soybean) import requirements (by China) in the coming weeks or months are indicated," the Hamburg-based Oil World magazine said Tuesday.

 

In the next four to five weeks, most Chinese soybean importers will buy more South American soybeans instead of U.S. soybeans, as soybean harvesting will begin in South America, Chinese analysts said.

 

South American soybeans are usually cheaper than U.S. varieties.

 

In other news, China imported at a brisk pace in the first 10 days of January, buying 1.3 million metric tonnes of soybeans from the U.S. and 400,000 tonnes from South America, according to statistics provided by COFCO Futures Co.

 

China National Cereals, Oils & Foodstuffs Corp., a major state-run grains trading company, holds a controlling stake in COFCO Futures Co.

 

Meanwhile, domestic soybean prices in China's major soybean-producing regions remained steady in the week to Friday, while buying by processors slowed on expectations of lower prices next month.

 

In Harbin, the capital city of Heilongjiang province - China's largest soybean-producing region - prices of average quality soybeans were unchanged around RMB2,520/tonne.

 

In major deals this week, the Kaohsiung division of Taiwan's Breakfast Soybean Procurement Association, or BSPA, purchased 57,000 tonnes of U.S. No. 2 soybeans from trading house Marubeni in a tender concluded Tuesday.