July 17, 2009

Soy futures traded on the Dalian Commodity Exchange settled lower Friday with the market digesting government sales, but there were signs of a milder fall to come due to bargain-hunting.

 

The benchmark May 2010 soy contract settled down RMB26 a metric tonne at RMB3,462/tonne.

 

Analysts don't expect the government's sale of 500,000 tonnes of soy next week to have much impact on the market, as the high auction base price is unlikely to attract much volume.

 

But in a market that is facing more downward pressure, traders are more likely to react to any negative news.

 

The commodities complex is in a similar situation, consolidating after the first half's big rise, and is likely to test bottom, said Wang Xiaoguang, an analyst with Galaxy Futures.

 

However, the increasing open interest for soy showed that some traders were seeking bargain-hunting, he added.

 

China's second-quarter economic data issued Thursday gave the market more evidence that the country, one of the world's major consumers of commodities, is through the worst of the slowdown, fuelling debate over whether officials need to start cooling things down a bit through monetary policy.

 

Analysts said if the government fine-tunes its policy in the second half and tightens credit somewhat, commodities markets will be under further downward pressure.

 

Thursday, the finance and economic committee of the National People's Congress, China's legislature, warned that the government must prevent the "extraordinary growth" of credit that could lead to inflation risks and problems for the financial system.

 

Trading volume for all soy contracts rose to 180,146 lots from 122,996 lots Thursday.

 

Open interest rose 10,274 lots to 359,898 lots.

 

Corn futures and soymeal futures settled lower, while palm oil futures and soyoil futures settled higher.

 

Friday'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              May 2010        3,462        Dn   26        180,146

Corn             Jan 2010        1,612         Dn    4          49,124

Soymeal       Jan 2010         2,777        Dn   14     1,359,890

Palm Oil        Jan 2010         5,720        Up   30        583,198

Soyoil           Jan 2010         7,062        Up   30        718,798