August 14, 2006

 

Monday: China Soybean Futures Settle Lower On Oversupply

 

 

Soybean futures traded on China's Dalian Commodity Exchange settled lower Monday, pressured by oversupply, said an analyst.

 

The most active January 2007 contract settled RMB25 lower at RMB2,520 a metric tonne, after trading between RMB2,509 and RMB2,535/tonne.

 

"The oversupply is still weighing on soybean futures," said Li Honglei, an analyst at Nanhua Futures Co.

 

But he said a rebound in soybean futures is possible in the long run.

 

"In addition to decreased acreage and unit production, which will lead to a drop in overall output, farmers will be reluctant to sell their new harvest at the current low prices, contributing further to tight supply later this year or early next year," Li added.

 

Total trading volume rose to 52,346 lots from 42,104 lots Friday. One lot is equivalent to 10 tonnes.

 

No. 2 soybean contracts, which are encouraged to be delivered with soybeans harvested from genetically modified crops, settled lower.

 

The benchmark September contract fell RMB6 to RMB2,444/tonne.

 

Soymeal settled mostly lower. The benchmark January 2007 soymeal contract fell RMB25 to settle at RMB2,212/tonne, after trading between RMB2,205 and RMB2,225/tonne.

 

Total trading volume for soybeans rose to 202,634 lots from 164,698 lots Friday.

 

"Soymeal futures prices dropped today, in step with soybean futures and pressured by spot market prices. Nevertheless, soymeal futures have the potential to rebound, as recent increases in prices of pork and poultry may spur a recovery in demand for feed," Li said.

 

Soyoil futures fell on profit taking, Li said, adding the price fluctuations may not reflect soyoil's fundamentals due to the thin trading volume.

 

The most active November 2006 soyoil contract fell RMB117 to settle at RMB5,511/tonne.

 

Corn futures settled lower. The benchmark May 2007 contract settled RMB9 lower at RMB1,383/tonne.

 

Total trading volume for corn fell to 339,652 lots from 349,378 lots Friday.

 

Li said compared with soybean prices, corn prices are too high and are therefore under pressure.

 

"Corn futures are still holding at a relatively high level compared with soybean futures. Moreover, total corn output in China will rise this year with increased acreage, adding to the bearishness for corn futures in the near future," Li added.