December 19, 2005

 

Monday: China soybean futures higher; soymeal trade at record high

 

 

Soybean and soymeal futures on China's Dalian Commodity Exchange settled higher Monday on active follow-through buying, with trading in soymeal surging to an all-time high of nearly 1 million lots after setting a record Friday.

 

Analysts expressed surprise at the extremely active trading in soymeal in recent days.

 

"Traders in the market are divided over whether the rise since last week is a rebound or a reverse, with the market having been undermined by constant outbreaks of bird flu over the past two months," said Ding Haijiang, an analyst with Zhejiang Nanhua Futures.

 

"In spite of the easing in bird flu (outbreaks), the turnover is still too stunning to explain," said Yu Junli, chief analyst with Green Futures.

 

"I don't know why, as there's no significant changes in fundamentals," Yu said. "I consider it as a technical rebound, rather than a reverse (of the downtrend)."

 

Prices will quickly drop if the high turnover isn't sustained, Yu warned.

 

Poultry stocks are expected to significantly decline after this week, resulting in a drop in feed consumption, and then soymeal prices. The poultry population usually decreases at the end of each year when fowl is slaughtered for consumption in the runup to and during the Lunar New Year holiday season, which often begins in January.

 

Soymeal is used mainly as feed.

 

By the close, the benchmark May 2006 soymeal futures contract settled RMB39 higher at RMB2,348 a metric tonne, after trading between RMB2,313/tonne and RMB2,369/tonne.

 

Trading volume in soymeal surged to a record high of 954,122 lots from 887,426 lots Friday.

 

One lot is equivalent to 10 tonnes.

 

The benchmark May 2006 soybean contract settled RMB26 higher at RMB2,704/tonne, after trading between RMB2,678/tonne and RMB2,722/tonne.

 

The total trading volume for soybean futures on the Dalian exchange rose to 371,392 lots from 347,010 lots Friday.

 

Green Futures' Yu said the trend in local soybean and soymeal futures prices will be influenced by Chicago Board of Trade soybean prices, which in turn will be affected by crop weather in Argentina, the world's third-largest soybean-producing country.

 

The trading of Dalian's No. 2 soybean contracts, which are encouraged to be delivered with soybeans harvested from genetically modified crops but are seldom traded, remained inactive, except the September 2006 contract.

 

The most heavily traded No. 2 soybean contract settled RMB24 higher at RMB2,652/tonne, after trading between RMB2,628/tonne and RMB2,665/tonne.

 

Corn futures traded on the exchange settled higher, mostly in line with the soy market.

 

The most widely held September 2006 contract rose RMB14 to settle at RMB1,342/tonne, after trading between RMB1,330/tonne and RMB1,350/tonne.