June 3, 2011


China's agri commodities futures rebound, led by soy, sugar


Majority of farm produce futures traded on Dalian and Zhengzhou commodity exchanges rebounded Thursday (Jun 2) after bearish performances in the past two days, with sugar and soy products rising nearly 1%.


However, tightening worries are expected to weigh on futures market in the short term. Domestic farm produce prices started to rise recently affected by the drought in the middle and lower reaches of Yangtze River, which triggered worries over inflation pressure. Insiders hold that CPI growth is likely to hit a record high in May.


Dalian soy products futures rebounded Thursday tracking an overnight rally on CBOT, with the January soy contract ending 0.54% higher at RMB4,478 (US$691)/tonne and bellwether soymeal contract up 0.81% at RMB3,380 (US$521)/tonne. Meanwhile, soyoil, palm oil and rapeseed oil futures prices ended up marginally.


Market hearsay went that the government would sell 2.12 million tonnes of soy, 100,000 tonnes of soyoil and 60,000 tonnes of rapeseed oil to the designated crushers at below-market prices before the end of June in an effort to stabilise prices. This not only cast negative effects on the current soft soy market but also aroused guesses that the government might extend price capping policy on edible oil. Zhengzhou cotton corrected after a persistent rise in the past several days, with the contract for September delivery down 0.36 percent to RMB26,205 (US$4,043)/tonne.


Currently, restocking demand from the downstream textile industry started to recover and many yarn plants showed rising intention for cotton purchases due to depletion of stocks. However, tightening worries may suppress rising room of Zhengzhou cotton.


Zhengzhou sugar for September delivery went up 0.84% to end at RMB6,718 (US$1,036)/tonne Thursday.


The latest data from the Guangxi Sugar Association show that the country's largest sugar producer Guangxi Zhuang Autonomous Region had sold 4.18 million tonnes of sugar from October of last year to the end of May, down 406,000 tonnes or 15.8% on-year. The region's sugar sales in May stood at 801,200 tonnes, up 231,200 tonnes over the year earlier period.


As sugar consumption peak is approaching, domestic sugar market may be boosted. However, sugar prices are likely to step into a downward trend in the long run in view of expected output increase in crushing season of 2011-12.

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