December 21, 2005

 

Asia Soybean Outlook: Premiums likely unchanged: China demand up

 

 

Premiums of soybeans delivered to Asia may remain unchanged in the week ahead, because while U.S. soybean futures are likely to fall and ocean freight rates are expected to stabilize, China's soybean demand will likely recover as bird flu fears ease.

 

U.S. soybean futures were mixed in the week to Tuesday. Technically, Chicago Board of Trade soybean futures seem overbought, and soybean export demand isn't expected to be strong - both factors could pressure futures prices later this week, analysts said.

 

In addition, "the general perception remains that ocean freight rates will continue to decrease (in coming weeks)...," according to a report by the Saskatchewan Wheat Pool Inc., Canada.

 

According to a U.S.-based analyst, there have been unconfirmed rumors that China bought U.S.-origin soybeans over the weekend.

 

A market commentary by the Chicago Board of Trade on Monday said that Chinese soymeal prices may be gaining strength as bird flu concerns have "peaked."

 

In China's domestic market, soybean prices rose slightly in the week to Friday, indicating bird flu worries are subsiding.

 

In Harbin, the capital city of Heilongjiang province - China's largest soybean-producing region - prices of average quality soybeans were quoted at RMB2,400-RMB2,450 a metric tonne Friday, up from RMB2,360-RMB2,440/tonne a week earlier.

 

China's soybean futures on the Dalian Commodity Exchange also settled mostly higher in the week to Tuesday.

 

However, in the week to Wednesday, soybean and soymeal buying from other major Asian buyers such as Taiwan and South Korea was almost non-existent.

 

Traders have already covered most of their soymeal needs for the next several weeks, so it is unlikely that more buying will take place soon, a South Korean buyer said.

 

When South Korean buyers return to the soymeal market, they will choose Indian-origin soymeal, which is about $20/tonne cheaper than soymeal shipped from South America, the buyer added.

 

One trader said there have been rumors that Vietnam may have bought 10,500 tonnes of Indian-origin soymeal for Jan. 20-30 shipment, although the reports couldn't be confirmed.

 

Meanwhile, the American Soybean Association has come up with a novel way to increase soymeal consumption in China.

 

It has launched a joint program with the University of Illinois College of College of Agricultural, Consumer and Environmental Sciences, or ACES, to increase swine production in China.

 

"The American Soybean Association asked us to put together a program for several faculties to promote modern swine production in China," Illinois' The News-Gazette Online quoted ACES Dean Robert Easter as saying.

 

"The notion is if they modernize the (swine) industry (in China), that will increase the need for soymeal to support the (swine) industry," he added.