October 17, 2008

  

Friday: China soybean futures up sharply; rebound as shorts cover

          

   

Soybean futures traded on China's Dalian Commodity Exchange settled up sharply Friday, with most contracts hitting daily upper limits in the late session on short-covering, but analysts said the rebound is likely to be very limited.

 

Domestic soybean futures have fallen by about 25% in the two weeks since the week-long National Day holiday, so holders of short positions decided to lock in profits after an overnight rebound in Chicago Board of Trade contracts.

 

The benchmark May 2009 soybean contract settled RMB118, or 3.9%, higher at RMB3,177/tonne.

 

Trading volume for all soybean contracts fell to 1,249,318 lots Friday from 1,694,534 lots the previous day.

 

Speculative money has exited futures markets for industrial materials and entered relatively cheap agricultural futures markets, where spillover strength has been felt from a limit-up move in sugar, said Gao Yanrong, an analyst at Dalu Futures.

 

"Large-scale suspensions by (soybean) crushers in some places offer fundamental support to prices," Gao said, adding that the rebound, however, likely face strong resistance around RMB3,400/tonne.

 

"Prices of imports scheduled to arrive in China in November are around RMB3,200/tonne. It would be unusual for domestic cash prices to be even higher than imports," said an analyst in Beijing.

 

Market talk is that in places such as Shandong province, about 70% of the crushers have halted operations, as they would be running in red, analysts said.

 

Soymeal and soyoil futures also settled higher, along with soybean futures.

 

However, traders said downstream demand is very weak, especially with some high-cost pig raisers suffering losses, so current prices might still be vulnerable to a further selloff.

 

Corn futures also settled higher, thanks to spillover strength from soy futures.

 

Friday's settlement prices in yuan a metric tonne and volume for all contracts in lots (one lot is equivalent to 10 tonnes):

  

Contract        Settlement         Price        Change      Volume

Soybean        May 2009          3,177        Up  118    1,249,318

Corn             May 2009          1,667         Up   34       824,034

Soymeal        Jan 2009           2,653        Up   84       604,340

Palm Oil         Jan 2009           4,848        Up   64       147,288

Soyoil            Jan 2009           6,398        Up  158       633,146