December 28, 2005

 

Asia Soybean Outlook: Premiums may rise on China demand

 

 

Premiums of soybean delivered to Asia may rise in the week ahead, as demand from China continues to recover while U.S. soybean futures are likely to remain well-supported.

 

U.S. soybean futures were mixed in the week to Tuesday, but analysts said traders are unwilling to build short positions on expectations that index funds may buy in January.

 

On the demand front, China seems to be the only active buyer from Asia for both soybean and soymeal. There hasn't been any large soybean or soymeal deals by Taiwanese or South Korean traders over the last two weeks.

 

"South Korean traders are well-covered until May and are in no hurry to book June shipments right away," said a trader in Seoul.

 

With bird flu fears receding, demand for soybean and soymeal is picking up from Chinese traders.

 

"Fears of avian flu have eased recently, as no new outbreaks were reported (in recent weeks). In China, feed demand from the poultry industry is reportedly picking up and soybean crush margins are improving," said Oil World, a Hamburg-based trade magazine.

 

At the same time, the official Xinhua News Agency reported that China's December soybean imports may be lower than 2 million metric tonnes.

 

The news agency said the "speed of Chinese soybean imports has slowed down somewhat owing to the influence of bird flu outbreaks."

 

The report said General Administration of Customs data showed China imported 690,000 tonnes of soybeans in the first 10 days of December.

 

China imported 2.56 million tonnes of soybeans in November, and imported 2.09 million tonnes of soybeans in December 2004.

 

However, prices in China's soybean markets were higher in the week to Friday on higher soymeal and soy oil demand.

 

In Harbin, the capital city of Heilongjiang province - China's largest soybean-producing region - prices of average quality soybeans were quoted around RMB2,420/tonne Friday, up RMB10-RMB20/tonne from the previous week.

 

With the Lunar New Year only a month away, demand for soybean is expected to rise further, traders said.

 

Meanwhile, Indian traders have sold three cargoes totaling around 36,000 tonnes of soymeal to China for delivery in January and February at $225-$230/tonne, cost, insurance and freight, a senior industry official said Tuesday.

 

In November, Chinese buyers backed out of contracts to buy around 50,000 tonnes of Indian soymeal after global soymeal prices fell.

 

India's soymeal prices have been climbing rapidly, with free-on-board prices in the Indian port of Kandla rising 9.6% over the last two weeks.

 

The current price of soymeal is $205/tonne, FOB, Kandla.