November 23, 2005

 

Asia Soybean Outlook: Premiums may fall on bird flu fears

 

 

Premiums of soybeans delivered to Asia are expected to fall this week as bird flu concerns continue to deter potential buying.

 

According to a report by the National Australia Bank, the outlook for meal demand remains uncertain "as bird flu stories continue to dominate headlines."

 

Bird flu worries are nudging buyers in Taiwan, China and other Asian nations to cut back on their soybean and soymeal purchases.

 

"Most Taiwanese buyers have bought enough soymeal almost a month back. Right now, buying is quite slow as companies take a cautious approach," said a trader in Taipei.

 

According to an analyst with Chinese soybean information provider epansun.com, "The pace of imports for both soybeans and soymeal is expected to be slower because of the bird flu concerns."

 

The analyst said the current premium for soybeans delivered to China in December over and above the Chicago Board of Trade January contract is 171 U.S. cents a kilogram for deliveries from the U.S. Gulf.

 

India, a major Asian soymeal producer and exporter, too is experiencing a fall in sales.

 

"International buyers are really reluctant to commit to fresh orders," said a trader in the western Indian city of Ahmedabad.

 

The trader, however, said Indian free-on-board, or FOB, soymeal prices seem to be bottoming out.

 

"No Indian trader is willing to sell below the current Indian FOB price of around $190/tonne. I have not heard of any deals taking place below that level," said the trader.

 

He further added that around 150,000 tonnes of soymeal is stuck at various Indian ports due to unavailability of vessels.

 

US Soybean Futures May Remain Sluggish

 

U.S. soybean futures also fell for most of the past seven days, largely hurt by weak fundamental news such as a hitch-free South American soybean crop and weaker demand due to bird flu.

 

According to analysts, the sluggishness in the U.S. soybean futures is also likely to continue in the near term, unless bird flu fears recede fast.

 

Meanwhile, soybean premiums are also likely to be pressured by a continuing trend of declining spot ocean freight rates.

 

Besides, barge rates for rivers in the U.S. remain significantly lower than last month, though some analysts said these rates may have bottomed out and hence could see a bounce.

 

In other news, local prices of soybeans fell in China's major soybean producing areas.

 

"We haven't begun buying local soybeans," a local Dalian trader told Dow Jones Newswires last week, citing bird flu fears.

 

In Harbin, the capital city of China's largest soybean producing Heilongjiang province, prices were quoted at RMB2,430-RMB2,440 a metric tonne Friday, down from RMB2,440-RMB2,460/tonne a week earlier.

 

Prices in Jiamusi, a city in eastern Heilongjiang, were around RMB2,400-RMB2,430/tonne, down from RMB2,420-RMB2,460/tonne.

 

One analyst said a large part of the uncertainty surrounding soybean and soymeal demand in the near term stems from the fact that bird flu affects poultry demand.

 

Unlike beef or pork, poultry production has a very short cycle of around one month. So if bird flu fears recede, poultry and hence meal consumption can get back to normal levels quickly, which means making educated guesses about soymeal demand difficult.