December 24, 2008
China's soy futures inched up Wednesday on the Dalian Commodity Exchange, tracking Chicago's bounce on technical grounds as traders took some comfort from the government's moves to stockpile grains.
The benchmark May 2009 soycontract gained 1.1 percent to settle at RMB3,235 a tonne.
But analysts were skeptical that the rally would last, and short positions were building as open interest in May soybeans rose by 11,958 lots to 323,120 lots Wednesday.
"Prices are rising - but just a bit - on the stockpile news, but prices are already high," said Gao Yanrong, of Dalu Futures.
Soy futures at the Chicago Board of Trade rallied Tuesday to three-week highs on fundamental and technical support, as firm export demand and concerns about dry weather in South America bolstered US crop prices.
The US is the world's reserve for soy supplies until South American production comes online in the spring, an analyst said.
But without any new development to give Chinese soy upside, downward pressure is building and prices have little room to rise much further, Gao said.
"Demand isn't rising," he said.
China's soybean imports in November fell 1.1 percent from the same month a year earlier, a sharp reversal from on-year growth of 43.6 percent in November of last year.
The government plans to prop up prices by stockpiling around 2.5 million tonnes of soy at RMB3,700/tonne, but analysts say it may not move fast enough to arrest the slide.
Corn, soymeal and vegetable oil futures all posted gains Wednesday.
Prices for vegetable oils and soymeal are expected to stabilize as demand peaks toward the Lunar New Year in late January, Gao said, even as the overall outlook on the agricultural complex remains weak.
Cash domestic soy prices in Heilongjiang, a major producing province, were largely unchanged from last week, at RMB3,320-3,440/tonne.
Following are Wednesday's settlement prices in RMB a tonne for benchmark contracts and volume for all contracts in lots (One lot is equivalent to 10 tonnes):
Contract Settlement Price Change Volume
Soy May 2009 3,235 Up 36 641,266
Corn May 2009 1,524 Up 4 375,580
Soymeal May 2009 2,322 Up 28 331,442
Palm Oil May 2009 4,876 Up 40 73,210
Soyoil May 2009 5,964 Up 60 295,618