July 6, 2011
Soy futures on the Dalian Commodity Exchange (DCE) extended gains Tuesday (Jul 5) in the second day of a technical rebound, but advances were capped by a strong dollar as investors were still wary of Europe's sovereign-debt problems.
The benchmark January soy contract settled 0.3% higher at RMB4,439 (US$686)/tonne.
The USDA's bullish soy acreage report, released at the end of June, is underpinning soy prices, after being ignored in previous sessions as the market focused on bearish corn acreage data, analysts said.
However, this year's domestic output is expected to fall sharply as a result of reduced acreage. The underlying assets of DCE No. 1 soy contracts are domestically grown, genetically unmodified soy.
Soy area this year is likely to fall 6.8% to 8.2 million hectares, while output is expected to drop 7.9% to 14 million tonnes, the state-controlled China National Grain & Oils Information Centre said in its May estimate.
Edible oil prices are expected to be firm after being oversold during the recent slump in crude oil prices, but still under pressure, as stabilizing prices remains the government's top priority, analysts said.
The strength of the dollar weighed on commodities markets broadly, reflecting a general decrease in appetite for risky assets, and the negative effect on sentiment toward global benchmark contracts denominated in dollars.