February 19, 2008

 

Tuesday: China soybean futures settle up on tight supply of agricultural products

 

 

Soybean futures traded on the Dalian Commodity Exchange settled at new highs Tuesday on a tight supply of agricultural products, but contracts retreated from earlier peaks on concerns of further tightening in monetary policy.

 

The benchmark September 2008 soybean contract settled RMB40 higher at 5,024 a metric tonne.

 

The gap between the global oilseeds supply and demand in the 2007/08 crop year will widen as growth in the supply is expected to be weak, said the Ministry of Agriculture in a statement Tuesday.

 

The global tight supply of soyoil - a result of strong demand for biofuels - has caused a rise in soyoil prices, despite an expected increase in soybean output in South America, it said.

 

However, agricultural products traded on the DCE all retreated from session highs after the National Bureau of Statistics issued 11-year high inflation data earlier Tuesday.

 

China's consumer price index in January rose 7.1% from the same month last year, driven by continued increases in food prices, it said.

 

The gain in the key inflation gauge exceeded December's 6.5% on-year rise, and was the fastest increase since September 1996's 7.4% gain.

 

Some traders chose to take profit in vegetable oil contracts after their recent strong gains, as they are concerned about a further tightening in monetary policy, said Dong Shuangwei, an analyst at Capital Futures.

 

Goldman Sachs said policymakers will likely try to tighten monetary policy further by introducing more reserve requirement ratio hikes, allowing a faster appreciation of the yuan and imposing more controls over bank lending.

 

But the impact could be short-lived, as the overall upside trend hasn't changed due to a tight supply of agricultural products globally, Dong said.

 

Palm oil futures settled mostly lower while soyoil futures settled mixed.

 

Soymeal futures settled higher and corn futures settled little changed.

 

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

 

               Contract      Settlement Price  Change     Volume

Soybean   Sep 2008      5,024         Up     40          621,344

Corn        Sep 2008      1,810          Up     1           702,054

Soymeal   Sep 2008      3,587         Up     33        1,038,494

Palm Oil    May 2008     10,744        Dn    164         51,424

Soyoil       May 2008     12,406        Up     106       429,926