March 18, 2008

 

Tuesday:  China soybean futures settle sharply down on US economy concerns

 

 

China's soybean futures, soy products futures and palm oil futures traded on the Dalian Commodity Exchange settled sharply lower Tuesday, amid concerns of a U.S. recession and lower crude oil prices overnight.

 

Most of these contracts hit limit-down at the start of trading.

 

The benchmark January 2009 soybean contract settled RMB176 lower, or 4% limit-down, at 4,224 a metric ton.

 

The volume for all soybean contracts fell sharply to 37,806 lots from 1,255,120 lots Monday.

 

Investors were extremely pessimistic about the U.S. economy, but the panic selling can't be explained by fundamentals of tight supply, said Dong Shuangwei, an analyst at Capital Futures.

 

Premier Wen Jiabao's revelation Tuesday of the size of China's grain reserves, a state secret, also helped drive prices lower as it showed the country has sufficient supply.

 

China's grain reserves are between 150 million to 200 million metric tons, said Wen.

 

"We are very confident (that we can) control the overly rapid growth in (overall) prices," he said during a press conference.

 

Surging food prices were largely blamed for pushing domestic consumer price index growth to a near 12-year high of 8.7% in February.

 

Stable grain prices can help to stabilize the surge in other commodities, such as vegetable oils, said a Wuhan-based trader.

 

The market may see further falls and it is very likely that soybean futures will fall below RMB4,000/ton, said Duan Yujie, a manager at Changjiang Futures.

 

Palm oil futures, soy oil futures, soymeal futures, as well as rapeseed oil futures traded on Zhengzhou Commodity Exchange, all hit limit-down during the session.

 

Corn futures also settled lower, and the volume jumped to 2,177,182 lots, compared with 521,838 lots Monday.

 

This showed a large amount of funds were flowing out of corn contracts, indicating further downward possibilities in corn prices, said Tu Xuan, an analyst at Shanghai JCI.

 

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

 

                  Contract  Settlement Price  Change     Volume

 

Soybean       Jan 2009            4,224            Dn 176       37,806

Corn           Sep 2008             1,761            Dn  50   2,177,182

Soymeal      Sep 2008            3,299            Dn 134       61,568

Palm Oil      May 2008           10,378            Dn 432        1,258

Soyoil         Sep 2008           11,040            Dn 460        1,306