April 14, 2008

 

Monday: China soybean futures up; government comment, cash values support

 

 

Soy futures traded on the Dalian Commodity Exchange settled higher Monday on short-covering on the back of a government official's comment on grain prices, and analysts said further downside is very limited, given higher cash values for soymeal and soyoil.

 

The benchmark January 2009 soybean contract settled 1.3% higher at RMB4,066 a metric tonne after trading between RMB3,972 and RMB4,156/tonne.

 

"Short-covering, possibly triggered by an official's remarks, sent prices higher, with higher cash values for soymeal and soyoil offering underlying support," said Dong Liang, an analyst at Shanghai Jiuheng Futures.

 

Nie Zhenbang, head of the State Grain Administration, said in remarks published in the People's Daily newspaper Monday that it is increasingly difficult for China to keep the supply and demand of grains balanced and prices stable.

 

In the long run, the problems of less arable land and water shortages will get more serious, and "it's increasingly hard to raise crop acreage continuously and steadily raise yields," Nie said in the newspaper, the mouthpiece of the Communist Party. 
 

In the meantime, "the impact of international market (changes) on domestic supply and demand is growing."

 

Soymeal and soyoil futures also settled sharply higher.

 

Analysts said rising production costs and high global prices are lending underlying support to soymeal and soyoil futures prices, which are lower than cash values and even production costs sometimes.

 

Corn futures settled higher as well.

 

The China National Grain and Oils Information Center, a government-backed think tank, said Monday that China's soybean acreage this year is likely to grow 12.6% from 2007 to 9.5 million hectares, leading to a 22.2% gain in output to 16.5 million tonnes.

 

It also forecast corn, wheat and rice acreage to fall, but said production will still rise from last year because of higher yields.  

 

Monday's settlement prices in yuan a metric tonne and volume for all contracts in lots:  

 

Contract          Settlement          Price          Change          Volume

Soybeans          Jan 2009           4,066          Up  54         1,437,316

Soymeal           Sep 2008           3,293          Up  42           547,068

Soyoil               Sep 2008         11,310         Up 238           520,408

Corn                 Jan 2009           1,927          Up  18           820,776

Palm Oil            May 2008         10,560         Up  74               6,298