March 3, 2008

  

China's power demand propels soy and soyoil futures to new highs

 

 

Soy futures traded on the Dalian Commodity Exchange settled at fresh highs Friday (February 29, 2008) after crude oil prices rose to a record high overnight.

 

The new benchmark January 2009 soy contract settled RMB84 higher at RMB4,782 a tonne.

 

Rising crude oil prices usually drive up prices of other commodities, raising expectations of higher inflation, said Li Honglei, an analyst at Nanhua Futures.

 

Forecasts of a very hot summer in China will increase power demand, in turn increasing demand for crude oil, he added.

 

Rising crude oil prices have made it profitable to produce biodiesel using soyoil.

 

Soyoil prices rose on continued new highs in soyoil futures set at the Chicago Board of Trade.

 

Crude oil's record high prices, global tight vegetable oil supply, as well as weakness in the US dollar, all helped to drive up soyoil prices.

 

 

Soy
 

Soy prices in Jiamusi city in Heilongjiang province were between RMB4,780 and RMB4,840 a tonne, up from around RMB4,740 the previous week.

 

However, the rising prices failed to boost trading volumes, as farmers were not actively selling in expectations of higher prices due to limited domestic supply, said China Soy Network.

 

China imported 3.44 million tonnes of soy in January, up 41.4 percent from a year earlier, according to final trade data issued Friday ( February 29, 2008) by the General Administration of Customs.

 

 

Soyoil
 

However, rising soyoil prices have curbed some demand, and Chinese traders were not actively buying soyoil due to concerns over government price control measures issued earlier this year.

 

China imported 150,732 tonnes of soyoil in January, down 20.3 percent on year, said customs.

 

Large amount of soyoil sales during the Chinese New Year also reduced stocks at traders' hands, and demand for soyoil is likely to stay at high levels in the near term, said the China National Grain and Oils Information Center.

 

Soyoil futures hit 4 percent limit-up during the session.

 

In southern Guangdong province, fourth-grade soyoil prices were at around RMB14,000, up from RMB12,600-RMB13,100/tonne a week earlier.

 

In Shandong province, fourth-grade soyoil was RMB13,700-RMB14,300/tonne, up from RMB12,800-RMB13,400/tonne last week.

 

Palm oil futures, soyoil futures, soymeal futures and corn futures all settled higher.

 

 

South American harvest
 

Next week looks drier for Argentina and southern Brazil. Heavy rains in the forecast for central and eastern Brazil for next week could significantly slow the harvest and provide some underlying support to the market, as a slow-paced harvest could translate into increased exports from the US in the short term, Penson GHCO's recent report cited cash traders in Hong Kong as saying.

 

Meanwhile, Chinese soy importers booked five-seven cargoes of soy from south America last week, according to commodities analysis firm Shanghai JCI.

 

The volume fell from the nine-11 cargoes in the previous week as surging soy prices curbed demand, Shanghai JCI said.

 

The soy booked this week are expected to be delivered in the April-June period, it said.

 

 

Soymeal
 

Soymeal prices were mostly stable, but prices in the northeast region were higher on insufficient supply.

 

In Jiangsu province, the prices of average-protein soymeal were RMB3,750-RMB3,800/tonne, relatively unchanged from RMB3,760-RMB3,800/tonne a week ago.

 

(US$1=RMB7.112)