July 22, 2009

China's soy futures traded on the Dalian Commodity Exchange settled higher Wednesday, as some traders set up long positions in expectations the government won't lower soy sales prices.

 

The benchmark May 2010 soy contract settled RMB26 higher at RMB3,536 a metric tonne, or up 0.7%.

 

The government will sell 500,000 tonnes of reserved soy in the northeast producing areas Thursday, and traders said the auction base price will be set at RMB3,750/tonne, which is much higher than the local prices of RMB3,480-RMB3,600/tonne.

 

Although market participants said the high base price was unlikely to attract much volume, some said the government won't lower it even if there are more sales, adding it will set the floor for cash prices, said an analyst with a foreign trading house.

 

Cash soy prices in major producing Heilongjiang province have been RMB20-RMB40/tonne higher this week.

 

"The futures prices are too low compared with the government's sales price," said a grain official at a state warehouse.

 

However, some analysts said the single-day rise in soy prices, amid an overall fall in agricultural products, doesn't represent a trend.

 

"The import costs for November and December will be very low, and prices (won't rise much)," said Li Dongji, an analyst with Guotai Jun'an Futures Brokerage, adding ample imports in recent months will also add supply pressure to the market, which isn't seeing much improvement in demand.

 

China's soy imports in June rose 31% on year to 4.71 million tonnes, the General Administration of Customs said Wednesday.

 

In the January-June period, soy imports rose 28% to 22.09 million tonnes.

 

The trading volume of all soy contracts rose to 301,658 lots from 109,122 lots Tuesday.

 

The open interest rose 21,786 lots to 379,458 lots Wednesday.

 

Corn futures settled little changed, while soymeal, palm oil and soyoil futures all settled lower.

 

Wednesday's settlement prices in yuan a 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       3,536        Up   26       301,658

Corn              Jan 2010       1,614        Dn    1          35,280

Soymeal        Jan 2010       2,830        Dn    7      1,210,396

Palm Oil         Jan 2010       5,746        Dn   64        635,768

Soyoil            Jan 2010       7,120        Dn   54        870,958