June 29, 2011


Tuesday: China soy futures rise on bargain hunting


Soy futures on the Dalian Commodity Exchange (DCE) chalked up modest gains Tuesday (Jun 28) on the back of bargain hunting, tracking overnight CBOT gains.


The benchmark January soy contract settled 0.5% higher at RMB4,416 (US$683)/tonne, with trade volume reaching 107,512 lots, a three-week high. One lot of soy on the DCE is equivalent to 10 tons.


July CBOT soy closed 0.7% higher at US$13.2975/bushel overnight in a technical rebound as the market expects the USDA to release bullish acreage reports Thursday. In its March report, the USDA said this year's soy area was expected to fall 1% to 76.609 million acres. Analysts said the actual acreage may be lower than the March estimate.


Soy futures show signs of rising as investors' confidence rises, analysts said.


Nevertheless, some fundamental problems remain, as soy is oversupplied in China, the world's largest importer and consumer. Edible oil consumption is in its off-season due to hot summer weather.


At the same time, the government's continued price caps on vegetable oils have pressured soy and it has continued sales of state soy reserves to increase market supply. An auction of 300,000 tonnes of state soy failed to attract any bids Tuesday, indicating weak demand.


Recovering soymeal demand on the back of hog production expansion and sharply reduced domestic acreage would seem to support soymeal prices, but the upside is still limited by the weekly auctions of state corn and feed-grade wheat

In Tuesday's auctions of state grain reserves, a total of 31,035 tonnes of feed-grade wheat and 169,258 tonnes of corn were sold to feed mills and animal farms, the National Grain and Oil Trader centre said.

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