September 14, 2005

 

Asia Soybean Outlook: Premiums to rise on ocean freight

 

 

Premiums of soybeans delivered to Asia are likely to rise with increasing ocean freight rates in the week ahead, but buyers are trying to hold off purchases until the U.S. Gulf Coast fully restores its Hurricane Katrina-impared grain export capacity, trade participants said Wednesday.

 

"The hurricane has disrupted the soybeans market in a way that both buyers and sellers have temporarily lost their barometer for fair prices...Free-on-board premiums at the ports are up sharply due to price hikes in the inland barge freight rates," said a Tokyo-based soybean trader.

 

"The FOB basis in the U.S. Gulf is more than 80 cents a bushel. That's crazy for new crop soybeans. It was only 45 cents in mid-August, before Katrina," said the trader.

 

That's why most Asian buyers, confused and having ample stocks for now, said they prefer to wait until the inland barge cost comes down.

 

But traders said it might not be a good idea, because the dry-bulk ocean freight rates are rising steadily now, on anticipation of large shipping demand during the October-December grain harvest and sales season in the Northern Hemisphere.

 

Panamax-size cargoes were offered Wednesday at US$39.25 a metric tonne on the benchmark route from the U.S. Gulf to Japan, up 40-50 cents from Tuesday's level, traders said.

 

"By the time the U.S. fully restores the (Gulf Coast's) grain export capacity, the Chicago futures prices might have gone up and the ocean freight rates might have gone up...I really don't know whether buyers would be better off buying soybeans later," said a Shanghai-based trader with a multinational trading company.

 

But in China, the world's largest soybean buyer, soybean crushers are said to be reluctant to sign new contracts.

 

"They (the soybean crushers) have ample stocks. They can also buckle up by reducing crushing temporarily. The point is, they don't want to be caught in a situation where raw material prices come down sharply and quickly. So the safe thing to do is to wait until the temporary mess gets all sorted out in the Louisiana Gulf," said the Shanghai trader.

 

U.S. soybeans were offered Wednesday at 180-190 U.S. cents per bushel over the Chicago Board of Trade's November contract, cost and freight to China in October.

 

In Japan, buyers are negotiating shipments for October-December with U.S. suppliers. But Japanese buyers have also slowed down their purchasing pace in anticipation of lower prices, traders said.

 

U.S. soybeans were quoted at 195 cents/bu over CBOT November, C&F to Japan during October-December, up from last week's 165 cents/bu, traders said.

 

South Korean buyers are comparing soymeal prices from the U.S., Brazil and Argentina, traders said.

 

Last week, a member of both South Korea's Major Feedmill Group and Korea Feed Association in Seoul bought 55,000 tonnes of South American soymeal from trading house Cargill, at US$252.33 a tonne, C&F. The soymeal was of 45.5% protein.

 

If Argentina could offer soymeal at more competitive prices, the cost-conscious South Korean buyers would consider Argentine low-protein soymeal of 43%, traders said.

 

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