October 25, 2005

 

Tuesday: China soybean futures settle mixed; new bird flu outbreak

 

 

Soybean futures on the Dalian Commodity Exchange settled mixed Tuesday after falling sharply over the past several trading days on renewed concern over bird flu.

 

China reported an outbreak of the virulent H5N1 bird flu strain among fowl last week in its northern Inner Mongolia Autonneomous Region.

 

Analysts said the local market has stabilized and may even stage a correction after recent heavy losses as selling momentum has tempered, presenting buying opportunities.

 

But reports of another bird flu outbreak in eastern Anhui province have raised fresh doubt over a possible recovery in the local futures market, according to analysts.

 

The new outbreak began last Thursday and killed 550 chickens and geese in the city of Tianchang, Anhui province, according to a report Tuesday filed by the Ministry of Agriculture to the World Organization for Animal Health.

 

Prior to these two outbreaks, the country had experienced similar spreading of the disease in other provinces such as Qinghai and Xinjiang earlier this year.

 

Demand for poultry feed such as corn and soymeal, and in turn soybeans, has been undermined and market confidence in the industry has been rocked by these incidents.

 

"Other than soybean planting conditions in South America, it seems bird flu will be an ongoing topic for some time," said a Beijing-based analyst. "Volatile trading is likely (in the coming days or weeks)."

 

By the close, five out of nine soybean contracts settled lower, with three settling higher and one flat.

 

The benchmark May 2006 contract gained RMB5 to settle at RMB2,746 a metric tonne, after trading between RMB2,736 and RMB2,759/tonne.

 

Total trading volume in soybeans fell to 328,530 lots from 424,258 lots Monday. One lot is equivalent to 10 tonnes.

 

Trading of No. 2 soybean contracts, which are encouraged to be delivered with imported genetically modified crops but are seldom traded, settled mixed.

 

The May 2006 No. 2 contract gained RMB2 to settle at RMB2,722/tonne, after trading between RMB2,715 and RMB2,730/tonne.

 

Dalian's soymeal futures settled mostly lower, but losses moderated from the past few trading days, thanks to some defensive buying.

 

The benchmark May 2006 contract lost RMB9 to settle at RMB2,365/tonne, after touching a low of RMB2,346/tonne. It hit an intraday high of RMB2,388/tonne.

 

Corn futures on the Dalian exchange settled slightly lower on light selling.

 

The most heavily traded January 2006 contract edged down RMB2 to settle at RMB1,231/tonne, after trading between RMB1,225 and RMB1,235/tonne.

 

China's futures trading is off-limits to foreign investors.