October 26, 2005

 

Wednesday: China soybean futures settle mostly down; bird flu worries

 

 

Soybean futures on the Dalian Commodity Exchange settled mostly lower Wednesday on further outbreaks of the H5N1 bird flu virus, negating the positive effect of a stronger overnight close for Chicago Board of Trade soybeans.

 

China reported a latest outbreak of the virulent H5N1 bird flu strain among fowl in southern China's Hunan province.

 

The local government in Hunan province killed 545 birds and prompted authorities to destroy 2,487 others recently to prevent the spread of the virus, according to a report posted on the Web site of the World Organization for Animal Health.

 

Prior to this, the government confirmed the deadly disease had spread to Anhui province in the east and Inner Mongolia Autonneomous Region in the north in the past week or so.

 

The spread of the disease has undermined market confidence in the industry, and demand for poultry feed such as corn and soymeal, and in turn soybeans, has weakened.

 

Although the local market usually mimics trading in CBOT soybeans, bird flu concerns have influenced trading trends in local soy futures market in recent days, analysts concurred.

 

"The (bird flu) factor has been mostly factored in," said a Dalian-based trader. "But it will continue to exert its influence on the market if more reports of spreading appear."

 

The benchmark May 2006 contract inched down RMB1 to settle at RMB2,745 a metric tonne, after trading between RMB2,737 and RMB2,755/tonne.

 

Total trading volume in soybeans fell to 257,844 lots from 328,530 lots Tuesday. 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 RMB4 to settle at RMB2,726/tonne, after trading between RMB2,725 and RMB2,730/tonne.

 

Dalian's soymeal futures settled mixed, but trading was more active than for soybeans, because of buying and selling interest.

 

The benchmark May 2006 contract gained RMB3 to settle at RMB2,368/tonne after trading between RMB2,358/tonne and RMB2,379/tonne.

 

The benchmark has lost RMB122 since China confirmed an outbreak of bird flu in Inner Mongolia last week.

 

"Soymeal prices in both the futures and cash market had been mostly dismal before the (bird flu) occurrence," said a Beijing-based analyst. "They have to bottom out somehow and sometime."

 

Corn futures on the Dalian exchange settled mostly higher on limited speculative buying.

 

However, the most heavily traded January 2006 contract lost RMB3 to settle at RMB1,228/tonne, after trading between RMB1,226 and RMB1,231/tonne.

 

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