Tuesday: China soy futures settle up amid fresh buying

 

 

China's soy futures traded on the Dalian Commodity Exchange settled higher Tuesday as traders seized yesterday's fall as an opportunity to buy.

 

The benchmark September 2010 soy contract settled RMB48 higher at RMB4,017 a metric tonne, up 1.2%.

 

A grain official's comment over the weekend on the government's readiness to release soy and vegetable oil reserves to cool recent price rises caused a sudden fall in futures' prices, but the worries soon abated.

 

"As industrial product prices are consolidating at the top levels while agricultural product prices lag far behind the market, any downward correction (in agricultural products) is an opportunity to buy in," said Huang Xiao, a manager with Capital Futures.

 

The recent rise in agricultural commodity prices -- from grains to vegetable oils -- as well as the booming property sector together boosted the market's expectations for higher inflation next year.

 

The country's economic planner said last night local prices of agricultural commodities, including grains and vegetable oils, were unlikely to rise rapidly as the government has sufficient reserves to curb any rise in prices.

 

The statement helped cap Tuesday's rise to an extent, but analysts said any such statement won't be of much help in cooling prices unless the government tightens access to liquidity.

 

Li Dongji, an analyst with Guotai Jun'an Futures Brokerage, said the government was unlikely to release soy reserves by March.

 

"Releasing reserves isn't an efficient way as the government anyway needs to buy back from the market to refill reserves," said Huang.

 

The trading volume of all soy contracts declined to 544,946 lots from 664,606 lots Monday.

 

The open interest rose 3,090 lots to 404,938 lots Tuesday.

 

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

 

Tuesday'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   Change      Volume

                               Price

Soy         Sep 2010    4,017       Up 48       544,946

Corn       Sep 2010    1,869        Up  8       147,032

Soymeal  Sep 2010    2,976       Up 49    1,395,276

Palm Oil  Sep 2010    6,898        Up 80      299,558

Soyoil      Sep 2010    7,856       Up 60    1,062,750