August 30, 2006

 

Asia Soybean Outlook: Premiums may fall on healthy US crop

 

 

Premiums for soybeans delivered to Asia may fall in the week ahead, as the U.S. soybean crop is in good shape and weather in the country's soybean-growing regions looks set to remain favorable for further crop development.

 

In the two sessions so far this week, Chicago Board of Trade soybean futures settled lower, and may set the trend for the rest of the week.

 

In Asia, Chinese traders cut back on soybean imports again, after having emerged to pick up cargoes last week.

 

"Chinese importers seem to have regained their wait-and-watch attitude toward soybean buying," said an analyst with commodities analysis firm JC Intelligence in Shanghai.

 

Over the past several weeks, Chinese importers have reduced their soybean imports from South America and the U.S. as domestic soybean stocks have swelled.

 

The cost of imported soybeans at Chinese ports has risen to around RMB2,700/tonne, compared with RMB2,600/tonne for soybeans that were imported few weeks ago, the analyst said.

 

This week, China has imported around two to three panamax-sized soybean cargoes, another Chinese grains trader said, adding that the beans were most likely to be from South America.

 

Soybeans delivered from the U.S. to China commanded a premium of 180 U.S. cents/bushel above the CBOT November contract, unchanged from last Wednesday.

 

Traders said ocean freight rates from the U.S. Gulf or South America to China also remained stable.

 

China's soybean imports are likely to increase in September and October, when soybean prices are expected to fall as U.S. soybean harvesting gets into full swing, traders said.

 

In addition, demand for poultry and pigs usually rises with the onset of winter in China. This could lead to an increase in demand for soymeal, which is a major ingredient for feed in both these sectors, the analyst at JC Intelligence added.

 

Meanwhile, China's domestic soybean consumption is expected to rise 3.7% to 43.7 million metric tonnes in the October 2005-September 2006 crop year, an official at the China National Grain & Oils Information Center, or CNGOIC, said Monday.

 

Soybean production, on the other hand, is estimated to fall to 16.4 million tonnes in the 2005-06 crop year, from 17.4 million tonnes in 2004-05, while imports may rise to 28 million tonnes from 25.8 million tonnes.

 

Soymeal consumption may rise to around 27.7 million tonnes in 2005-06 from 24.3 million tonnes in the last crop year, the official said.

 

Domestic soybean prices in China continued to rise, largely on increased demand for soymeal.

 

Chinese soybean processors have stepped up their soybean purchases to meet growing soymeal demand, and farmers were busy selling off their old soybean stocks to take advantage of the higher prices.

 

In other parts of Asia, South Korea's CJ Corp. bought 55,000 metric tonnes of Brazil-origin soybeans from trading house Marubeni in a tender last week.

 

The premium for soybeans delivered to South Korea from Brazil is around 188.5 U.S. cents a bushel above the CBOT November contract.

 

In Japan, soybean imports may fall in 2006, as Japanese millers continued to crush less soybeans in Japan, preferring to increase their crushing capacity in China.

 

"As less soybeans are being crushed in Japan, the country will be increasingly importing less soybeans and buying more soyoil and soymeal," said a Tokyo-based trader.

 

While Japan imported 4.18 million tonnes of soybeans in 2005, imports in 2006 could fall below 4 million tonnes.