October 26, 2007

Low output pushes soy futures to a record in China's Dalian
 

Soy futures on Dalian Commodity Exchange this week climbed to a record-high after reports indicated sharply lower global soy output for this year's crop on top of declining global supplies.

Dalian's most active A0805 contract hit RMB  4,318 at one point, an all-time high.

Major soy production regions in north-eastern China are expected to have soy production about 10 percent lower than that a year ago. In the US, soy production experienced an even greater drop as farmers switched more soy acres to corn so as to cater to the ethanol industries.

Global soy output would be 221.62 million tonnes this year, down 6.1 percent from that a year ago and the lowest in nearly two decades, according to the USDA.

This flurry of lower production figures has sent soy futures on a rally, with record buying of 10 million tonnes since July.

Soy prices have defied the usual market economics, plunging during the summer when supplies are low while soaring at the current harvest.

Bean pulp futures have also followed the rise in soy futures, with Dalian's bean pulp contract hitting a high level of RMB  3282 in intraday trade, with traded volume at 5.2 million tonnes.

Prices are expected to continue upwards as the livestock market revives from its previous slump.