June 8, 2009

China's soy futures traded on the Dalian Commodity Exchange settled lower Friday, with the market speculating the government may release soys from its reserves soon.

 

The benchmark January 2010 soy contract settled RMB45 lower at RMB3,734 a metric tonne, or down 1.2%.

 

The contract opened slightly lower at the start of the session, tracking a moderate fall on the Chicago Board of Trade Friday.

 

The decline remained within 0.5% of the previous settlement price for most of the morning session, but deepened to as low as 2.1% in the afternoon session, as rumor spread the government may release soys in the market.

 

However, some analysts said the rumor was unfounded as the government hasn't yet completed its soy purchase, due at the end of the month.

 

An analyst with a foreign trading house said it could be just a rumor, as it came only after talk of corn sales, which led to speculation of more such crop sales.

 

But agricultural futures contracts will be facing increasing supply pressure in the near future, with the government having begun cotton sales recently, said Fan Guowei, an analyst with Tianma Futures Co.

 

The government has bought large volumes of agricultural products, from corn to sugar, from last year's bumper harvest to support prices and protect farmers' interests.

 

The trading volume of all soy contracts declined to 254,976 lots from 311,088 lots Friday.

 

The open interest rose 13,422 lots to 359,616 lots Monday.

 

Corn, soy meal, soy oil and palm oil futures all settled lower, driven down by concerns of a rise in supply soon.

 

The government is likely to sell 15 million tonnes of corn from its reserves soon, a person familiar with the matter said Monday.

 

Several government agencies have agreed on the initial sales plan to sell the corn to processors, mainly in the northeast, at RMB1,500/tonne, and subsidize the buyers by RMB100/tonne, he said.

 

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

                           

Contract          Settlement          Price          Change       Volume

Soy                  Jan 2010           3,734          Dn   45       254,976

Corn                Jan 2010           1,638           Dn   28       280,180

Soy Meal          Jan 2010           3,046           Dn   24    1,885,954

Palm Oil           Jan 2010           6,570           Dn  114      174,978

Soy Oil             Jan 2010           7,844           Dn  104      614,774