November 16, 2005


Asia Soybean Outlook: Premiums may fall on CBOT, freight



Premiums of soybean delivered to Asia may fall as spot ocean freight rates are expected to drop amid a bearish outlook for Chicago Board of Trade soybean futures.


Premiums may also slide after U.S. analysts forecast that inland barge rates in the U.S. will drop further because barge traffic is returning to normal following the end of the hurricane season.


Spot ocean freight rates for panamax-size cargoes from the U.S. Gulf to Japan are being quoted around $48 a metric tonne so far, unchanged from last week.


The freight rates may fall further in the next two weeks due to slow demand.


However, once winter demand for coal starts building up in China around late December, the rates may climb back above $50/tonne, traders said.


Soybean futures on CBOT traded lower Monday and Tuesday due to large available supply, a lagging exports pace, bird flu concerns and favorable planting conditions in South America.


Demand for soybean remains mixed across Asia. China continues to buy large amounts but demand from Japan has slowed, as Japanese traders focus on talks with sellers over January soybean shipments.


China's soybean imports in October rose 21.5% on year to 1.9 million tonnes, the General Administration of Customs said last week.


Soybean imports in the January-October period jumped 38.1% to 21.42 million tonnes, the administration added.


Although China continues to actively buy soybeans from the U.S. and South America, demand for soymeal has sharply fallen due to the bird flu scare in many parts of the country, a Chinese analyst said.


China has reported nearly a dozen outbreaks of the deadly H5N1 strain of the virus in the past month, prompting fears that the virus may be more widespread than previously thought, as well as raising the possibility that human cases may be going undetected or unreported, The Wall Street Journal Asia reported Tuesday.


The latest outbreaks in China have infected more than 6,000 birds in the western province of Xinjiang, the report cited a spokesman for the World Health Organization in Beijing, as saying.


Indian Traders Confident Soymeal Exports Will Rise


Meanwhile, the bird flu outbreak that has hurt the Southeast Asian poultry industry hasn't damped Indian traders' confidence that the country's soymeal exports will rise.


Traders expect soymeal exports in the current marketing year ending September 2006 to climb to 2.3 million tonnes from 2 million tonnes in 2004-05.


"I do not see (bird flu) having any significant impact on our exports," said Rajesh Agrawala, chairman of the Soybean Processors Association of India, a local industry lobby group.


Many traders in Indore, India's soybean trading and processing hub, believe the poultry industry will revive quickly across Asia, once worries over bird flu fears recede.


Indian traders also said they were renegotiating recent deals with Chinese buyers to sell around 50,000 tonnes of soymeal and may agree on rates lower than contracted earlier, following a drop in global prices.


The fate of four cargoes with a total volume of more than 50,000 tonnes, which have yet to be shipped to China, seems uncertain, as Chinese buyers are no longer prepared to pay the original price of more than $240/tonne, cost and freight, traders said.


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