Wednesday: China soy futures drag down market sentiment; complex falls

 

 

Soy futures tumbled along with the commodities complex on the Dalian Commodity Exchange Wednesday, as wobbling investor sentiment sent equity and other markets into correction mode.

 

The benchmark May 2010 soy contract lost 1% to RMB3,620 a metric tonne.

 

"There's no real change to the basic demand and supply picture," said Li Xiaoli, an analyst with Beite Futures. "But without much positive news this week, the market sentiment's been turning."

 

A stronger dollar and weakening equity markets had set the stage for a broad commodity retreat this week.

 

A months-long rally among commodities had already begun to lose steam after China's central bank said two weeks ago it was mulling a "fine-tuning" of its policy, Li said.

 

The market took the line as implying tightening credit conditions, a rumor the regulators have been quick to hose down but which nevertheless continues to fuel market chatter.

 

Added to that, global grain markets have remained weak with crop supportive weather conditions in the U.S. Midwest weighing on prices, Barclays Capital said late Tuesday.

 

In China, weak state soy reserve sales have prompted China's State Council, its cabinet equivalent, to consider subsidies of RMB200/tonne to help soy crushers in the northeast, domestic media reported Wednesday.

 

But Chinese demand remains healthy, analysts said.

 

"China was in the market the past couple of days for more soys," AgriCharts noted Wednesday. "China has currently purchased 237 million bushels of soys (6.5 million tonnes) for the 2009-10 marketing year which begins Sept. 1."

 

Corn, soymeal, palm oil and soyoil futures all fell Wednesday.

 

Wednesday'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):

 

 

Product      Contract     Settlement  Price  Change     Volume

 

Soy         May 2010      3,620         Dn       38        328,262

Corn       May 2010      1,703         Dn       28         559,536

Soymeal  May 2010      2,806         Dn       25       2,159,638

Palm Oil   May 2010      6,306         Dn      46         957,082

Soyoil     May 2010      7,374          Dn      72        1,373,556