June 14, 2011


Monday: China soy futures slip on auction sale, inflationary expectation


Soy futures on the Dalian Commodity Exchange closed marginally lower Monday (Jun 13) in thin trade ahead of important economic data and a state auction of soy from reserves.


Consumer price index data for May, which could herald further monetary tightening, and an auction of 300,000 tonnes of soy from state reserves are both scheduled to weigh on market sentiment.


The benchmark January soy contract settled 0.1% lower at RMB4,459 (US$688)/tonne, with losses limited by support from moderate gains in corn and soymeal on the back of high pork prices. Trade volume was 73,118 lots, a three-month low.


Investors stayed on sidelines ahead of the inflation data, as edible oils and soy drifted lower due to speculation that an interest-rate increase could be imminent, and that the National Development and Reform Commission would keep price caps on edible oils.


"The government's policy pressure remains the biggest hurdle for edible oils and soy moving higher," according to the state-owned Zhengzhou Grain Wholesale Market.


China's inflation rate for May is likely to exceed 5% and may peak above 6% in June, said Zhang Zhuoyuan, a research fellow at the Chinese Academy of Social Sciences. Analysts said the rate is expected to rise due to high food prices and a relatively low base of comparison last year.


Traders and other industry participants said the government is likely to extend the price caps for another two months to August, when inflation is expected to slow somewhat.

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