January 12, 2009

China's soybean futures traded on the Dalian Commodity Exchange settled sharply higher Monday, boosted by gains on the Chicago Board of Trade overnight and the government's expanded purchase plans.

 

The benchmark September 2009 soybean contract settled RMB115, or 3.4%, higher at RMB3,499 a metric tonne.

 

Forecasts for drier weather in Argentina's major soybean producing areas also helped the rebound.

 

China's government will buy another 3 million metric tonnes of soybeans and 5 million tonnes of rice to stabilize local prices and protect farmers' interests, the State Administration of Grain said Monday.

 

The purchase price will be same as in three earlier rounds of interventions, the administration said in a statement published on its Web site. Planned purchases under the three earlier interventions are to reach a total of 50.5 million tonnes.

 

Analysts said the additional buying will likely help to support prices, but the effect could be limited as markets will still be carrying ample stocks.

 

Local processing plants are buying local soybeans at prices between RMB3,200-RMB3,400 a metric tonne, lower than the government's purchase price of RMB3,700/tonne, but many farmers prefer to sell to these plants, said a local analyst with a big soybean processing company.

 

The intervention price of RMB3,700/tonne could be strong resistance for the current uptrend, said Zhao Weiwei, an analyst at Tianqi Futures.

 

Trading volume in the benchmark soybean contract rose to 1,004,118 lots from 967,462 lots Friday.

 

Corn futures, soymeal futures, soyoil futures and palm oil futures all settled higher.

 

Soymeal prices were supported by the tight supply, as many soybean processing plants have suspended production due to expectations of sluggish demand.

 

Whether prices rise from current high levels depends on whether poultry and other meat prices can increase and shore up demand for feed materials, said Liu Peng, a manager at Longma Consultation Co.

        

Monday's settlement prices in yuan a metric tonne for benchmark contracts and volume for all contracts in lots (One lot is equivalent to 10 tonnes):

 

Contract         Settlement        Price        Change      Volume

Soybean         Sep 2009         3,499        Up  115   1,004,118

Corn              May 2009         1,567        Up    9       181,882

Soymeal         May 2009        2,750        Up   74       799,048

Palm Oil         May 2009         5,654        Up  158      143,488

Soyoil            May 2009         6,622        Up  166      440,436