July 16, 2009
Thursday: China soy futures settle down on news of government sales next week
Soy futures traded on the Dalian Commodity Exchange settled lower Thursday, in reaction to news that the government will begin selling soy from its reserves next week.
The most actively traded May 2010 soy contract settled RMB12 a metric tonne lower at RMB3,488/tonne.
China will auction 500,000 tonnes of soy and 2 million tonnes of corn starting next week, a state-backed Web site said Thursday.
The base prices of the soy and corn will be RMB3,750/tonne and RMB1,550/tonne respectively, both higher than the government's purchase prices, said the China Oils Network, which is owned by China Grain Reserves Corp.
The government bought more than 6 million tonnes of soy and 35 million tonnes of corn at RMB3,700/tonne and RMB1,500/tonne, respectively.
However, the contract recovered some of its losses by the end of the session as the unattractive base price for soy will damp demand while leaving the market less affected by the expected increase in supply from the sale, said analysts.
Domestic soy processing plants can only make profits when prices are around RMB3,600/tonne, and they would rather suspend production if they are likely to lose money, said Yu Haifeng, an analyst with Tianqi Futures.
The trading volume for all soy contracts rose to 122,996 lots from 114,178 lots Wednesday.
Open interest rose 230 lots to 349,624 lots.
Corn futures, soymeal futures and soyoil futures settled lower, while palm oil futures settled higher.
The government's expected corn sales have put more downward pressure on corn as the base price is around the same level as cash market prices and trading is likely to be more active than for soy, said analysts.
Thursday's settlement prices in yuan a metric tonne for benchmark contracts and the volume for all contracts in lots (One lot is equivalent to 10 tonnes):
Contract Settlement Price Change Volume
Soy May 2010 3,488 Dn 12 122,996
Corn Jan 2010 1,616 Dn 10 83,108
Soymeal Jan 2010 2,791 Dn 21 1,782,246
Palm Oil Jan 2010 5,690 Up 2 655,358
Soyoil Jan 2010 7,032 Dn 14 996,670
