February 2, 2012

China's agricultural commodities futures lengthen rise

The agricultural produce futures contracts of China on Dalian and Zhengzhou commodity exchanges outperformed metals and chemical products on Wednesday (Feb 1), led by soy which increased nearly 2%.

Some analysts said that soy prices were mainly pushed up by major long holders but they still faced strong resistance at RMB4,400/tonne. With absence of favourable factors from fundamentals, Dalian soy was unlikely to go up persistently, they added.

CBOT soy soared by more than 2% overnight propped by rising exporting demand and expectation for crop output decline in South America.

The September soy contract on the Dalian Commodity Exchange ended 1.81% higher at RMB4,384/tonne (US$695.78) and the soy oil contract for September delivery closed 0.47% higher at RMB9,032/tonne (US$1,433.47).

Despite robust rise, it's still uncertain whether Dalian soy can maintain the growth momentum given ample supply and sluggish demand on the domestic market. Meanwhile, systematic risks in macro economy will also add pressure on soy prices in the following period.

The most actively traded September cotton contract on ZCE closed 0.2% higher at RMB22,120/tonne (US$3,510.67). The national cotton price index CCIndex 328, which indicates the average price of standard lint in China, closed at RMB19,332/tonne (US$3,068.18) Wednesday, up RMB19 (US$3.02) from the previous trading day.

Now the domestic large cotton processing mills start to resume production and some textile enterprises' orders also begin to rise. The state stockpiling programme for cotton and restocking demand from downstream industries are likely to shore up cotton prices. Analysts tip short-term resistance for the September contract at RMB22,500/tonne (US$3,570.98).