January 13, 2012

Farm produce futures contracts on Dalian and Zhengzhou commodity exchanges generally went up after the release of key economic data, but still ended mixed with soy and soyoil in negative territory.

China's consumer price index (CPI), a main gauge of inflation, rose 4.1% on-year in December, slightly higher than earlier expectations. However, the Producer Price Index (PPI), a main gauge of inflation at the wholesale level, rose 1.7% on-year in December, marking the slowest pace in two years on waning demand.

The continuous fall of CPI growth also sent the signal that China might ease the monetary policy. Some market analysts predict that the central bank may cut the requirement reserve ratio before the Spring Festival.

Despite the boost from economic data, Dalian soy still ended lower tracking an overnight slump in CBOT soy pressured by increasing precipitation over the main growing area in South America.

The bellwether September soy contract on the Dalian Commodity Exchange ended 0.32% lower at RMB4,355 (US$689)/tonne while the most actively traded soy contract for September delivery closed 0.35% lower at RMB9,082 (US$1,438)/tonne.

Market analysts project that the domestic soyoil prices will lack momentum for a robust rise weighed by adequate market supply. By the end of 2011, soy inventory at Chinese ports stood at a high level of 6.8 million tonnes.

The China National Grain and Oils Information Centre said Thursday (Jan 12) China's soy imports in January were likely to fall 20.6% on-year to 4.3 million tonnes, as Spring Festival holiday (January 22-28) would be a main factor to affect soy shipments this month.

Zhengzhou cotton has risen for five trading days and the most active contract for May delivery ended 0.78% higher at RMB21,310 (US$3,373)/tonne. The national cotton price index CCIndex 328, which indicates the average price of standard lint in China, closed at RMB19,237 (US$3,045)/tonne Thursday, up RMB6 (US$0.95)/tonne from the previous day.

As the ongoing state purchase has absorbed a large amount of cotton resources on the market, spot cotton prices started to rise moderately. Meanwhile, textile enterprises began to replenish raw materials stocks and this also helped underpin cotton prices.