Thursday: China soy futures settle up on government purchase plan details

 

 

China's soy futures traded on the Dalian Commodity Exchange settled higher Thursday, as money flowed in after details of the government announced its purchase plans.

 

The benchmark September 2010 soy contract settled RMB74 higher at RMB3,960 a metric tonne, up 1.9%.

 

The contract opened at RMB3,920/tonne, then the highest level in 2009, and rose to RMB3,995/tonne near the closing bell.

 

The Chinese government will start buying soy and corn from northeast major producing areas from December 1, according to a statement published on a government-related Web site Thursday.

 

The government will buy standard third-grade soy at RMB3,740/tonne and corn of the same grade at RMB1,480-RMB1,520/tonne in different areas, according to a statement published on China Oils Network, which is managed by China Grain Reserves Corp.

 

The soy purchase price this year is higher than last year's RMB3,700, and besides the purchase, the government will also provide subsidies for soy and corn purchases at RMB160/tonne and RMB70/tonne respectively if the purchase prices are higher than market prices.

 

"The soy market looks safer than equities, as it is supported by government policies, and some money may flow in from equities," said Xu Wenjie, an analyst with Tianma Futures Co.

 

Chinese shares surrendered strong gains from the previous session to end sharply lower Thursday, as the possibility of a tighter monetary policy and banks' fundraising plans continued to weigh on investors.

 

However, prices above RMB4,000/tonne are still risky for traders given the government purchase price of RMB3,740/tonne, Xu said.

 

The trading volume of all soy contracts jumped to 867,876 lots from 300,982 lots Wednesday.

 

The open interest rose 51,868 lots to 322,594 lots Thursday.

 

Corn, soymeal, palm oil and soyoil futures all settled higher.

 

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

 

Product    Contract    Settlement Price  Change     Volume

Soy         Sep 2010      3,960        Up    74      867,876

Corn       May 2010      1,787        Up    10      126,388

Soymeal  Sep 2010      3,005        Up    26     2,398,362

Palm Oil   Sep 2010      6,832        Up   122     349,652

Soyoil      Sep 2010      7,894        Up    84     1,315,980