Friday: China soy futures settle down; funds exit expecting correction
China's soy futures traded on the Dalian Commodity Exchange settled lower Friday, extending yesterday's fall, after funds left the market amid expectations for a downward correction.
The benchmark September 2010 soy contract settled RMB90, or 2.2%, lower at RMB4,000 a metric tonne.
The contract opened lower and broke an earlier support of RMB3,960 near the noon session, testing as low as RMB3,947/tonne.
Long holders closed position and left the market as expectations of an inflation-boosted rise were being reconsidered, said analysts.
As the earlier rise in soy and soy products was based on ample liquidity rather than fundamentals, these products will fall faster than metals once liquidity hopes fade, said Huang Xiao, a manager at Capital Futures, adding a round of downward correction is likely if the market doesn't stabilize soon.
Analysts said the soy contract's next support level is at RMB3,900/tonne, with strong cash prices amid the government's purchases preventing big declines.
Meanwhile, the earlier high of RMB4,194 on Wednesday is now being regarded as a level hard to breach ahead of the Chinese New Year holiday in mid-February.
The trading volume of all soy contracts declined to 538,484 lots from 719,034 lots Thursday.
Open interest fell 29,434 lots to 328,552 lots Friday.
Soymeal, palm oil and soyoil futures all settled lower, while corn futures bucked the trend to settle 0.6% higher.
"Funds are entering into corn, which didn't rise much earlier, showing risk avoidance sentiment," said Li Lei, an analyst with Cofco Ltd.
Friday's settlement prices in yuan a tonne for benchmark contracts and volume for all contracts in lots (one lot is equivalent to 10 tonnes):
Product Contract Settlement Price Change Volume
Soy Sep 2010 4,000 Down 90 538,484
Corn Sep 2010 1,915 Up 12 637,840
Soymeal Sep 2010 2,960 Down 56 1,296,088
Palm Oil Sep 2010 7,046 Down 176 866,300
Soyoil Sep 2010 7,762 Down 208 1,170,604
