June 2, 2011

Soy futures on the Dalian Commodity Exchange ended marginally lower Wednesday (Jun 1) in thin volume, tracking soy on the Chicago Board of Trade.

The benchmark January contract edged down to settle at RMB4,454 (US$687)/tonne, after trading in a very narrow range of RMB4,443-4,464 (US$686-689)/tonne. July CBOT soy slipped 0.3% overnight to close at US$13.76 a bushel.

Trading volume was only 75,168 lots in the full session, the lowest in more than three months, as a lack of fresh cues prompted investors to stay on the sidelines.

Marketers are worried about whether the government will allow major edible oil manufacturers to increase their retail prices following the expiry of its price controls on Tuesday.

The price caps, which were introduced last December as part of Beijing's efforts to combat inflation, have forced many medium- and small-sized crushers to suspend operations due to poor profit margins.

However, the government will continue its massive release of state reserves at below-market prices to some large-sized crushers to increase market supply, as controlling inflation is the government's top priority in economic management this year.

It plans to sell 2.12 million tonnes of soy, along with soyoil and rapeseed oil, in June to major crushers including the Cofco Group, Yihai Kerry and Chinatex.

The government sold three million tonnes of soy to the big crushers at RMB3,500 (US$540)/tonne in April, when market prices of soy hovered around RMB3,800 (US$586)/tonne.

Soyoil prices have fallen about 1.5% so far this year, while rapeseed oil prices have increased 3.3% and palm oil prices have dropped 10%, according to the Ministry of Commerce.