October 11, 2006

 

Asia Soybean Outlook: Premiums likely down; bumper US harvest

 

 

Premiums of soybean delivered to Asia may fall in the week ahead as the U.S. prepares for a bumper soybean harvest.

 

The U.S. Department of Agriculture is set to release soybean output estimates on Thursday, which are expected to confirm analysts' expectations of a record soybean harvest.

 

Almost 50% of the U.S. soybean harvest has already been completed, and harvesting is expected to continue until November.

 

In Asia, China increased its soybean purchases last week, after a rather sluggish pace of imports in September.

 

An analyst with commodities firm JCI Shanghai said Chinese importers booked three to five cargoes of soybeans last week.

 

Separately, Chinese importers have booked one to two cargoes of soybeans every week over the past several weeks, other traders said.

 

China is the world's biggest soybean importer.

 

However, analysts added that there won't be any spectacular jump in China's soybean imports in the remainder of 2006, and monthly imports will continue to be steady.

 

China's total soybean import arrivals in October is expected to be around 2.5 million metric tonnes, said traders and analysts.

 

Premiums for soybeans delivered to China from the U.S. fell sharply to 180 U.S. cents/bushel above the Chicago Board of Trade November contract from 195 cents/bushel last Wednesday.

 

However, rising freight costs could potentially provide support for premiums on soybean delivered to China from U.S., Chinese analysts said.

 

"It seems like spot ocean freight costs from U.S. to China may firm up over the next few weeks," the Chinese trader said.

 

Chinese soybean importers, who had largely been buying South American soybeans until September, are now switching to U.S. soybeans as harvesting is getting into full swing.

 

Meanwhile, China's soybean harvest has also begun and will only end in November, which will pressure domestic soybean prices, analysts said.

 

Domestic soybean prices could fall to as low as RMB2,000/tonne over the next couple of months, pressured by the new harvest, some analysts said.

 

At present, soybean prices are being quoted around RMB2,200-RMB2,400/tonne in major producing regions.

 

According to the China National Grain & Oils Information Center, a major government-backed think tank in the agricultural sector, China's soybean production may total 15.9 million tonnes in the October 2006-September 2007 marketing year, down from 16.35 million tonnes in the last marketing year.

 

Meanwhile, China continues to be overstocked with soybeans, both the imported variety as well as domestic beans, because farmers in the key soybean-growing province of Heilongjiang are holding up to 20% of their old crop.

 

Major soybean processors have held back soybean buying in recent days, as the upcoming new crop will help lower prices.

 

In India, the soybean harvest is in full swing and will conclude later this month. So far, soybean supply to processing plants has been very good, traders said.

 

According to trade estimates, India will produce 7 million tonnes of soybeans in 2006, largely unchanged from 7.05 million tonnes in 2005.

 

Meanwhile, India's soymeal exports in September rose sharply to 281,855 tonnes from 104,377 tonnes in the same period of last year, lobby group Soybean Processors Association of India said Wednesday in a statement, without providing any reasons for the rise in exports.