February 14, 2012

 

Soyoil leads China's agricultural produce futures recovery

 

 

The futures contracts of China's agricultural produce on Dalian and Zhengzhou commodity exchanges increased across the board on Monday (Feb 13).

 

Investors regained confidence after Greece approved a new austerity deal for a second bailout loans from EU and International Monetary Fund creditors to avoid a full-scale default next month.

 

Soyoil futures traded on the Dalian Commodity Exchange (DCE) led the rebound, with the bellwether September contract ending 1.13% higher at RMB9,332/tonne (US$1,482). The most actively traded soy contract for September delivery went up 0.57% to end at RMB4,420/tonne (US$702).

 

Analysts suggest investors pay attention to soy planting area of the US and China, adding that soyoil futures are expected to rise steadily in the short term though the rise room is limited.

 

Currently, many domestic soy crushing mills still suffer losses in soyoil production. Meanwhile, soy inventory at ports stands at a high level. In the light of this, soy products futures on DCE have weak support from fundamentals.

 

Some industry insiders said that the state purchases would help prop up sugar prices in the slack season of consumption, but the low transaction rate indicated tepid trading mood on the market and was likely to weigh on sugar prices.

 

Meanwhile, cheaper sugar prices on the international market may also exert pressure on the domestic market.

 

The most actively traded September cotton contract on ZCE ended flat at RMB22,205/tonne (US$3,526.67). The national cotton price index CCIndex 328, which indicates the average price of standard lint in China, closed at RMB19,475/tonne (US$3,093.09) Monday, up RMB3 (US$0.48) from the previous trading day.

 

Zhengzhou cotton may correct in the following period after persistent rise since the beginning of this year, some analysts say.

 

Many cotton traders expect that China may raise the minimum purchase price for cotton from March as part of its effort to stabilise cotton area in the coming planting season starting around April. However, the domestic cotton prices are difficult to rise sharply given heavy pressure from imported cotton as well as sluggish demand from downstream industries.