September 7, 2005

Asia Soybean Outlook : US premiums to rise after Katrina



Premiums of soybeans delivered to Asia are likely to rise in the week ahead, after Hurricane Katrina crippled ports along the U.S. Gulf and everything from fuel oil price hikes to the shortage of labor at port facilities along the U.S. Gulf Coast will get factored into soybeans' cost, traders said.


Ports along the Gulf of Mexico and Mississippi River typically handle about 2 billion bushels of U.S. grain and oilseed exports combined annually.


"I think everybody is assessing the damage right now, things like how soon can they restore the Mississippi River barge traffic, electricity and manpower. One thing is certain though, that everything is going to be more costly, and so are the premiums," said a Taipei-based grain trader.


After Katrina, Asian buyers will have to brace themselves for higher premiums of U.S. grains, at least temporarily, traders said.


Harvesting of U.S. grains and oilseeds will be in full swing from the end of September until the end of November, lending support to dry-bulk ocean freight rates in the months ahead, as large numbers of ships will be booked to haul grains from the U.S. to other parts of the world, traders said.


Moreover, ship owners normally charge higher rates because some routes in the winter usually require a longer time to complete than in the summer, traders said.


Wednesday, panamax-size cargoes were offered at $36.11 a metric tonne on the benchmark route from the U.S. Gulf to Japan, up slightly from last week's level.


Panamax-size cargoes were offered at $21.69/tonne on the Pacific Northwest to Japan route, also up from last week.


Meanwhile, Asian buyers haven't slowed purchasing of new crop U.S. grains and oilseeds in the wake of Katrina.


"Most buyers are now purchasing soybeans for October-end or November arrival, so they are apparently not concerned over a prolonged crippled state of the U.S. Gulf ports," said a Seoul-based trader.


Many buyers said they expect barge traffic and ports in the U.S. Gulf to get back to normal in 10 days. Also, suppliers are playing it safe by offering optional loading ports from either the U.S. Gulf or the Pacific Northwest, traders said.


In Japan, buyers are negotiating October and November shipments with U.S. suppliers.


Wednesday, U.S. soybeans were quoted at 169 U.S. cents per bushel over the Chicago Board of Trade November contract, cost and freight to Japan for first-half November shipment, traders said.


In China, soybean crushers continue to boost their production to profit from improved sales of soyoil and soymeal which typically occur ahead of the week-long National Day holiday, traders said.


But the Chinese haven't started making big-volume purchases of U.S. new crop soybeans, as they had purchased plenty of South American soybeans in previous months, traders said.


"The bulk of the U.S. soybean sales will start around the end of September," said a Beijing-based trader.


U.S. new crop soybeans were quoted at slightly more than $280/tonne Wednesday, cost and freight to China for late-October shipment, little changed from last week.


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