August 13, 2007

 

Monday: China soybean futures settle up; soymeal surges on feed demand

 

 

Soybean futures traded on the Dalian Commodity Exchange settled sharply up Monday on a strong demand outlook amid drought concerns, analysts said.

 

The benchmark May 2008 soybean contract settled RMB86, or 2.4%, higher at RMB3,618 a metric tonne.

 

Total trading volume rose to 540,226 lots from 329,038 lots Friday. One lot is equivalent to 10 tonnes.

 

"The growing demand for feedmeal, following the jump of pork prices, sent soymeal prices up sharply, and in turn soybean prices," said Dong Liang, an analyst with Jiuheng Futures Co.

 

Crushing soybean produces soymeal, which is used to make animal feed, and soyoil.

 

China's pork prices have been rising steadily in recent months, which is encouraging farmers to raise more pigs.

 

China's consumer price index in July rose 5.6% from the same month last year, with the meat and poultry component up 45.2% on year, the government said Monday.

 

Meanwhile, the drought developing in some major growing regions is enhancing supply side concerns, said Gao Yanrong, an analyst with Dalu Futures Co.

 

"There might be further upside for soy futures ahead," Gao said.

 

Soymeal and soyoil futures also settled sharply higher, with some soymeal contracts ending at the 4% daily limit.

 

The benchmark January 2008 soymeal contract settled RMB89 higher at RMB2,809/tonne, and the benchmark January 2008 soyoil contract settled RMB38 higher at RMB8,404/tonne.

 

Turnover for all soymeal contracts hit a year-to-date record at 858,320 lots.

 

"There are some fresh domestic speculative money inflows to agriculture (commodities)," Gao said.

 

Gao said investors see consolidation ahead in stocks, after the index repeatedly set record highs, while metals (futures) seem to be too risky now.

 

Analysts said the higher opening for soybeans in Chicago Board of Trade electronic trading Monday also underpinned the positive sentiment.

 

Dalian's corn futures settled higher on spillover strength from soy futures, analysts said.

 

The benchmark May 2008 contract settled RMB29 higher at RMB1,590/tonne.

 

Trading volume for all corn contracts rose to 853,872 lots from 405,686 lots Friday.

 

"The strong bullish sentiment in soy futures helped to drive up corn (prices), but I rather think it's just continuing its technical rebound," said a trader in Beijing.

 

"We might have passed the worst time for corn, but the weakness is likely to remain for a while, especially for near-month contracts," he said.