July 19, 2006

 

Asia Soybean Outlook: Premiums may fall; slow China demand

 

Premiums of soybeans delivered to Asia are expected to fall in the week ahead, as Chinese buying continues to slow.

 

China, the world's biggest soybean importer, has in recent weeks been cutting back on booking fresh orders, as the country's stocks are overflowing.

 

"Basically, China over-imported in the February-May period, and now they're trying to use up their stocks," said an analyst in Shanghai.

 

"(Chicago Board Of Trade) traders are a bit concerned that China's buying will slow over the near term," said an online commentary on CBOT's official Web site.

 

It added that Chinese ports are overstocked with soybeans and some Chinese traders are trying to delay arrivals of imported soybean shipments by a few weeks, to avoid a further pileup.

 

CBOT.com added that margins for soybean crushers in China are falling and most crushing units are running out of space to store soymeal.

 

According to China-based traders, China's soybean imports are unlikely to pick up pace over the next 4-5 weeks at least.

 

They added that whatever little new soybean imports are being booked by Chinese traders are mostly of South American origin.

 

"Unless soybean premiums on CBOT fall sharply, a revival in Chinese imports looks unlikely," said one trader.

Premiums for soybeans delivered from Argentina to China are currently around 155 U.S. cents a bushel above CBOT's November contract.

 

The premium for soybeans delivered from Brazil to China is around 135 cents/bushel above the CBOT November contract.

 

In China's local markets, soybean prices continued to fall as sluggish demand persisted while supply remained abundant.

 

Chinese farmers still hold around 10%-15% of the total soybean crop and are reluctant to sell at the current prices.

 

Over the past seven days, no soybean import deals were reported from other major soybean importers South Korea and Taiwan.

 

A trader in Seoul said major feed buying groups the Korea Feed Association and Major Feedmill Group may jointly float a tender for soymeal imports next week, after a gap of two months.

 

The trader said the groups are hoping to buy soymeal at prices of around US$230-US$235/tonne.

 

The trader added that soymeal prices have climbed roughly US$15/tonne in the past two months, which has kept most South Korean feed buyers away.

 

Meanwhile, India's soybean crop may hit a record 7.8 million to 8 million tonnes this year, compared with 7 million tonnes in 2005, if monsoon rains are adequate over the next 4-5 weeks, a government scientist told Dow Jones Newswires Monday.

 

"The soybean crop is in excellent shape, and we are really optimistic about reaping a bumper harvest," said G.S. Chauhan, director of the state-run National Research Centre for Soybeans, in the central Indian city of Indore.

 

Chauhan said the yield of the soybean crop in 2006 is expected to be around 1.2 tonnes/hectare versus 0.9 tonnes/hectare in 2005, mostly because of sowing being completed by July 2 instead of the usual July 8-10, which allows the plants more time to mature.

 

He added that the area planted to soybeans in India will be little changed in 2006, at 7.5 million hectares versus 7.4 million hectares in 2005.