September 25, 2007

 

Tuesday: China soybean futures settle mixed; correction likely continue

 

 

Soybean futures traded on the Dalian Commodity Exchange settled mixed Tuesday, and analysts said the correction may continue in the short term after prices set record highsearlier this month at above RMB4,100 a metric tonne.

 

The benchmark May 2008 soybean contract settled RMB3 higher at RMB4,071/tonne.

 

Total trading volume rose to 827,594 lots from 678,354 lots Monday. One lot is equivalent to 10 tonnes.

 

Traders were cautious about buying after a slew of government measures to keep volatile domestic food prices in check were issued.

 

China will offer 200,000 metric tonnes of vegetable oils comprising 178,000 tonnes of soyoil and 22,000 tonnes of rapeseed oil in a domestic auction Friday, government-run National Grain & Oil Trade Center said late Monday.

 

The government also said it will boost its state reserves of soybeans and vegetable oil, in a bid to guarantee domestic supply amid rising demand. This is among its earlier policies to encourage oilseeds production.

 

However, these policies are only likely to slow down the rate of price increase of agricultural products, but won't stop the hikes amid excess liquidity, said Huang Xiao, a manager with Capital Futures.

 

Soymeal futures settled lower but soyoil futures settled mostly higher.

 

The benchmark May 2008 soymeal contract settled RMB16 lower at RMB3,130/tonne, and the benchmark May 2008 soyoil contract settled RMB22 higher at RMB8,328/tonne.

 

Corn futures also settled lower.

 

The benchmark May 2008 contract settled RMB12 lower at RMB1,624/tonne.

 

An official from National Grain & Oil Trade Center said on condition of anonymity Tuesday that "it is likely" a corn auction may take place after the National Day holiday from Oct. 1-8.

 

Market participants said the government will sell at least 1 million tonnes of corn from state reserves in the domestic market at prices below market levels.

 

The government may increase the volume of corn to be offered in the auction to 3 million tonnes if needed, they said.

 

However, these auctions will only bring brief respite, because the volumes that will be offered in the auctions aren't large, and the government will need to buy vegetable oil and corn to replenish state reserves.

 

"The fall in prices will be limited despite possible downward correction in the short term," said Zhang Yifan, a trader at China Grains & Oils Group Feed Corp.

 

Total trading volume for corn futures declined to 409,616 lots from 485,996 lots Monday.