December 1, 2005

 

Thursday: China soybean futures settle mostly lower; corn up

 

 

China's Dalian Commodity Exchange soybean futures settled mostly lower in subdued trading Thursday, giving up some of Wednesday's gains.

 

Limited follow-through buying was overwhelmed by fresh short selling, traders said.

 

The benchmark May 2006 soybean contract lost RMB7 to settle at RMB2,536 a metric tonne, after trading between RMB2,528/tonne and RMB2,552/tonne.

 

Total trading volume for soybean futures fell to 213,866 lots from 378,752 lots Wednesday. One lot is equivalent to 10 tonnes.

 

The local market rose Wednesday on some bargain hunting as there has been no report of new bird flu outbreaks for a day or so.

 

However, China confirmed Wednesday night a new outbreak of bird flu virus in western Xinjiang autonneomous region.

 

So far, the country has reported 25 outbreaks of bird flu across the country since October and the government has killed millions of fowl.

 

It has also confirmed three human cases of bird flu, including two fatalities.

 

The disease has driven local soybean and soymeal futures back to lows not seen since earlier this year

 

Some analysts said there is little chance of a meaningful market rebound in the short term as the disease is difficult to control.

 

"Likely, we will see some more consolidation (around the lows)," one Beijing-based analyst said.

 

Dalian's No. 2 soybean contracts, which are encouraged to be delivered with soybeans harvested from genetically modified crops but are seldom traded, settled mostly lower.

 

The most actively traded No. 2 May 2006 soybean contract settled RMB3 lower at RMB2,517/tonne, after trading between RMB2,512/tonne and RMB2,529/tonne.

 

Soymeal futures traded on the exchange also settled mostly lower, pressured by continued bird flu worries.

 

Recently, spot soymeal prices across the country have fallen to RMB2,150-RMB2,280/tonne from RMB2,300-RMB2,500/tonne a month earlier on easing feed demand.

 

The benchmark soymeal contract gave up RMB7 to settle at RMB2,149/tonne, after trading between RMB2,138/tonne and RMB2,167/tonne.

 

However, corn futures traded on the exchange settled higher on fresh speculative buying.

 

In addition to making feed, corn, unlike soymeal, can be used to make other products such as starch and ethanol that aren't affected by bird flu.

 

China's corn exports this year have also recovered from last year as domestic supply is enough to meet local demand and the government decided to allow more exports.

 

"No matter what you call these factors - reasons or excuses - players can bid up the futures market even though most corn is used as feedgrain," one analyst said.

 

The most heavily traded September 2006 contract settled RMB7 higher at RMB1,285/tonne, after trading between RMB1,282/tonne and RMB1,293/tonne.