December 18, 2007

 

Tuesday: China soybean futures settle sharply down on tax rebate scrap

 

 

Soybean futures traded on the Dalian Commodity Exchange settled sharply lower Tuesday, as the latest measures by the government to reduce exports of major agricultural commodities weighed on prices amid expectations of more domestic supply.

 

The benchmark September 2008 soybean contract settled RMB80 lower at RMB4,446 a metric tonne after trading between RMB4,428 and RMB4,495/tonne.

 

China's Ministry of Finance said late Monday the value-added tax rebates on exports of soybeans, corn, wheat, rice and their products will be canceled effective Thursday.

 

"Although China's total soybean exports aren't a big amount, it makes people believe that the government is really serious about taming prices," said Liu Xinghua, an analyst at Great Wall Futures.

 

People are concerned that there could be more policies underway to tame prices, Liu said.

 

China's consumer price index hit an 11-year high in November, which was mainly driven by grain and food prices, and therefore aroused the government's concern.

 

China is the world's biggest importer of soybeans and gets most of its supplies from the U.S., Brazil and Argentina, the world's leading soybean producers.

 

Soymeal and soyoil futures also settled sharply lower, along with soybean futures.

 

Domestic agricultural commodities futures will remain quite cautious in the near term, Liu said.

 

But "I think there is only limited downside for the correction, as the uptrend in CBOT is intact. We'll catch up with them sooner or later," said Yu Junli, senior analyst at Green Futures.

 

Corn futures settled sharply lower as well.

 

"This is really bad news for corn, both in terms of fundamentals and market sentiment," said an analyst with a major grain trading firm in Beijing.

 

In an industry guideline issued by the National Development and Reform Commission in September, the government had already asked provinces to reduce exports "in principle" to ensure domestic supply.

 

Tuesday's settlement prices in yuan a metric tonne and volume for all contracts in lots:

 

                Contract        Price      Change     Volume

Soybeans  Sep 2008      4,446      Dn  80     554,950

Soymeal   Sep 2008      3,328      Dn  86      985,726

Soyoil       May 2008      9,672      Dn  98      68,042

Corn         May 2008      1,731      Dn  24     788,972

Palm Oil    May 2008      8,730      Dn  46      24,644