September 26, 2007

 

Wednesday: China soybean futures settle up; demand expected to strengthen

 

 

Soybean futures traded on the Dalian Commodity Exchange settled higher Wednesday, as China's soybean imports are expected to rise on strong demand in the fourth quarter despite rising import costs.

 

The benchmark May 2008 soybean contract settled RMB59 higher at RMB4,130 a metric tonne.

 

Total trading volume declined to 881,286 lots from 827,594 lots Tuesday. One lot is equivalent to 10 tonnes.

 

A drought in China's major soybean producing regions is likely to result in soybean output reduction of at least 30% this year, while increasing demand will encourage crushers and traders to import more soybeans.

 

"The demand for soymeal will definitely be better going towards June and July next year" due to the recovery of China's hog industry, said Xia Tian, an analyst at Yongan Futures.

 

Concerns of lower soybean production has pushed the government to lower its soybean import tariff to 1% from 3% for three months starting from October.

 

Soymeal futures settled higher, but soyoil futures settled mostly lower after China said it will sell 200,000 tonnes of soyoil Friday.

 

The benchmark May 2008 soymeal contract settled RMB46 higher at RMB3,176/tonne, and the benchmark May 2008 soyoil contract settled RMB28 lower at RMB8,300/tonne.

 

The auction, comprising 178,000 tonnes of soyoil and 22,000 tonnes of rapeseed oil, is part of a slew of government policies aimed at keeping volatile domestic food prices in check, after rising food prices pushed the country's inflation to 6.5% in August, a level that hasn't been seen in more than a decade.

 

Traders concerned China may sell more soyoil after the auction if the rapid price increase doesn't cool down.

 

Corn futures settled higher, with the benchmark May 2008 contract settling RMB21 higher at RMB1,645/tonne.

 

Total trading volume for corn futures rose to 510,670 lots from 409,616 lots Tuesday.