July 23, 2009

China's soy futures traded on the Dalian Commodity Exchange settled higher Thursday, tracking gains at the Chicago Board of Trade overnight.

 

The benchmark May 2010 soy contract settled 0.5% higher at RMB3,552 a metric tonne.

 

The government failed to sell any of a planned 500,000 tonnes of reserve soy during auctions Thursday as the auction base price of RMB3,750/tonne is much higher than local prices of RMB3,480-RMB3,600/tonne.

 

Thus cash supply remains tight, and traders are reluctant to sell due to limited stocks.

 

Analysts said the government will have to provide subsidies to processors in order to sell the reserve soy if it insists on selling them at prices higher than its purchase price of RMB3,700/tonne.

 

"The government will sooner or later sell its reserves" as rainy weather in the northeast producing areas this year has made preserving its huge soy stocks difficult, said Ma Yangqing, an analyst with Guangfa Futures.

 

CBOT soy also face more downward price pressure on favorable weather outlooks and Chinese sales, analysts said.

 

Trading volume of all soy contracts declined to 266,122 lots from 301,658 lots Wednesday.

 

Open interest fell 2,762 lots to 376,696 lots Thursday.

 

Corn, soymeal, palm oil and soyoil futures all settled higher.

 

Thursday'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       3,552        Up   16         266,122

Corn               Jan 2010       1,620         Up    6           38,328

Soymeal          Jan 2010       2,842        Up   12      1,355,742

Palm Oil           Jan 2010       5,748        Up    2         475,688

Soyoil              Jan 2010       7,132        Up   12        670,016