November 1, 2005

 

Tuesday: China soybean futures settle up; govt may buy new crop

 

 

Soybean futures on the Dalian Commodity Exchange settled higher Tuesday on a mix of short covering in near-month contracts and long buying in forward-month contracts.

 

Possible government buying of newly harvested soybean crop triggered speculative buying in the futures market, analysts said.

 

This turned into technical buying when the benchmark soybean and soymeal contracts broke technical resistance levels.

 

Talk circulated in the market that the government may buy up to 1 million metric tonnes of soybeans to add to state reserves to help boost market demand and farmers' income.

 

Soybean prices in Heilongjiang, China's largest soybean producing province, have been hovering below RMB2,500/tonne over the past few weeks, down from a year ago. These prices can only make up for production costs, some analysts said.

 

In addition, demand for soymeal, one end product of soybean, has been devastated recently by outbreaks of the bird flu virus.

 

The benchmark May 2006 soybean contract rose RMB31 to settle at RMB2,769/tonne, after trading between RMB2,738/tonne and RMB2,782/tonne.

 

Buying in the benchmark contract accelerated during the day when it rose above resistance at RMB2,750/tonne, some analysts said.

 

But whether the technical rebound can be sustained remains unclear, they added.

 

Total trading volume in soybeans jumped to 357,390 lots from 143,704 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 higher.

 

The May 2006 No. 2 contract rose RMB20 to settle at RMB2,739/tonne after trading between RMB2,719/tonne and RMB2,749/tonne.

 

Dalian soymeal futures settled mostly higher, with active long buying seen in the benchmark May 2006 contract when it poked above technical resistance at RMB2,391/tonne.

 

The benchmark gained RMB36 to settle RMB2,411/tonne, after trading between RMB2,379/tonne and RMB2,426/tonne.

 

Corn futures on the Dalian exchange settled higher, encouraged by gains in soy futures.

 

The benchmark May 2006 contract settled RMB6 higher at RMB1,267/tonne, after trading between RMB1,262/tonne and RMB1,274/tonne.

 

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