July 30, 2008


Wednesday: China palm oil futures settle sharply down on policy concerns



China's palm oil futures traded on the Dalian Commodity Exchange settled sharply lower Wednesday on policy concerns related to the upcoming Olympic Games.


The benchmark September 2008 palm oil contract settled RMB266 lower at RMB8,672 a metric tonne, or down 3.0%.


The fall in the soybean contract slowed after the recent tumble, with the benchmark January 2009 contract settling RMB11 lower at RMB4,508/tonne, or down 0.2%, after trading in a RMB4,457-RMB4,537/tonne range.


The recent tumble in crude palm oil futures on Malaysia's derivatives exchange to their lowest level since Dec. 12, and the continuous fall in crude oil prices, added to the pressure on DCE palm oil.


Analysts said keeping grain and vegetable oil prices stable during the Olympic Games, which start Aug. 8, is a major task for the government.


"The domestic market's focus is now on vegetable oil, the prices of which are likely to consolidate lower until the Olympics end," said Zeng Xuezhou, an analyst at Beite Futures.


Earlier, a rumor of the government's possible release of soybean oil from its reserves, though not confirmed officially, caused panic in the market, which remains concerned over any possible policy move.


However, the momentum for more downside is unlikely after the recent sharp fall, Zeng added.


Soy oil and corn futures settled lower, while soybean meal futures settled mixed.


Some analysts expect the feedmeal demand for corn and soy meal to pick up in the second half tracking developments in the feedmeal sector.


The tight supply of piglets will be eased in the fourth quarter of this year on an increase in the number of female hogs, Vice Agricultural Minister Zhang Baowen said in a statement published on the Ministry of Agriculture's Web site late Tuesday.


Wednesday's settlement prices in yuan a metric tonne and volume for all contracts in lots (One lot is equivalent to 10 tonnes):


Contract            Settlement            Price            Change            Volume

Soybean             Jan 2009             4,508            Dn  11           1,224,118

Corn                  Jan 2009             1,845            Dn  16              455,094

Soy Meal            Jan 2009             3,727             Up   4              768,856

Palm Oil             Sep 2008             8,672           Dn 266               29,944

Soy Oil               Jan 2009             9,976            Dn  98              388,012

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