May 31, 2011

Soy futures on the Dalian Commodity Exchange fell marginally Monday (May 30) due to rising supply pressure, ignoring a broad rally in most agricultural commodities led by rice and wheat amid concerns that a nationwide drought may affect output.

The most actively traded January soy contract fell RMB1 (US$0.15) to settle at RMB4,455 (US$687)/tonne.

"Prices remain under pressure as supply is sufficient," said a soy trader, adding that the government's plan to sell a massive amount from reserves was the main reason behind weak prices.

China plans to sell 2.12 million tonnes of reserve soy in June at RMB3,300-3,500 (US$509-540)/tonne to keep domestic edible oil prices stable.

The government sold three million tonnes in April in exchange for pledges from major crushers to hold down prices.

Drought has affected about seven million hectares of farmland as of May 29, according to data from the Office of State Flood Control and Drought Relief Headquarters.

Hubei, Hunan, Jiangxi, Anhui and Jiangsu provinces are the worst hit. They are major rice producers located in the midstream and downstream regions of the Yangtze River.

Worries over damage to crops boosted the benchmark September early-season rice contract on the Zhengzhou Commodity Exchange, which gained 2.3% to settle at RMB2,578 (US$398)/tonne. Benchmark January strong gluten wheat settled 1.3% higher at RMB2,915 (US$450)/tonne.