January 24, 2007

 

Wednesday: China soybean futures up on CBOT gains; soymeal pressure

 

 

China's soybean futures traded on the Dalian Commodity Exchange settled mostly higher Wednesday on overnight gains on the Chicago Board of Trade, but closed lower on sluggish soymeal demand.

 

The most active September 2007 contract gained RMB6 to settle at RMB3,090 a metric tonne.

 

Total trading volume rose to 146,380 lots versus 81,082 lots Tuesday. One lot is equivalent to 10 tonnes.

 

CBOT soybean futures closed higher overnight, with support from bullish expectations that U.S. President George W. Bush would tout alternative fuels in his State of the Union address.

 

As expected, later that night, Bush called for a 20% cut in gasoline consumption over the next decade through new fuel efficiency standards and a massive boost in federal mandates for the use of ethanol and other alternative fuels.

 

Soyoil can be used to produce biodiesel, a processed fuel that can replace petroleum-based diesel fuel, while corn-based ethanol is another alternative fuel.

 

However, China's soybean futures retreated from earlier gains and ended lower on concerns over decreasing soymeal demand.

 

Farmers have been reluctant to increase their livestock due to the Asian bird flu outbreak, said Liu Xinghua, a trader at Great Wall Futures Co.

 

Soymeal is used as animal feed.

 

Xu Lixin, a trader with Jingyi Futures Co., expects soybean future prices to gain momentum after the Spring Festival, which falls on Feb. 18, and remain high for another two to three months as more farmers begin to raise new livestock.

 

Domestic soybean prices are low compared with those of imported soybeans, leaving more room for a rise in future prices in the long run, he said.

 

Soymeal futures settled mostly lower, while soyoil futures settled mixed.

 

The most active September 2007 soymeal contract settled unchanged at RMB2,585/tonne.

 

However, the benchmark May 2007 soyoil contract rose RMB31 to RMB6,648/tonne.

 

Corn contracts settled lower, failing to gain momentum as cash market prices were largely stable, said Liu.

 

In Jilin, China's largest corn-producing province, the prices of average quality corn were quoted at RMB1,080-RMB1,160/tonne in the week to Wednesday, unchanged from a week earlier.

 

The benchmark September 2007 corn contract fell RMB10 to settle at RMB1,713/tonne.

 

Trading volume for corn contracts totaled 910,434 lots, compared with 482,766 lots Tuesday.