May 18, 2011

China's commodity market trends down amid dollar rebound

China's commodity futures market continued downward correction Tuesday (May 17), with majority of products traded in tight range, as rebounding US dollar weighed on commodity prices.

Soy futures traded on the Dalian Commodity Exchange dipped to this year's new low of RMB4,326 (US$665)/tonne in morning trade before a moderate rebound, with the January contract ending 0.87% lower at RMB4,355 (US$669)/tonne.

Chinese government failed to sell out any of the 300,000 tonnes of reserve soy offered at an auction Tuesday after several failures in the past several auctions, mainly due to unappealing floor prices and weak soy market recently. Meanwhile, the latest monthly report by the USDA also cast negative effects on soy.

Edible oils futures extended the decline, pressured by the government's price cap policy and stockpile sales. Currently, domestic edible oil processing mills are making losses in production and possess a large amount of soymeal stocks. Furthermore, China's resumption of soyoil purchases from Argentina is also negative to edible oil prices.