August 19, 2003



China Soybean Futures Settle Higher; Benchmark Hits Record High



China's Dalian Commodity Exchange soybean futures settled sharply higher Tuesday, with the benchmark contract hitting a record high, on speculation of a possible halt in China's soybean imports in the next two months.


The benchmark January 2004 contract rose to a record high of 2,556 yuan ($1=CNY8.28) a metric ton before eventually settling CNY43/ton higher at CNY2,525/ton.


The speculation arose after market participants repeatedly heard from their sources at trading firms that the government had adopted much stricter measures to monitor soybean imports. The quarantine authority was perceived as having delayed offering quarantine permits to soybean importers.


The quarantine permit is vital for importers, as no soybean cargoes can be unloaded without the permit.


The increasing difficulty in obtaining quarantine permits also adds to importer's; costs, as the demurrage for vessels stranded at Chinese ports is poised to rise quickly.


"It's very likely we will see no soybean imports in September and October if the government continues to carry out its strict control over imports," said a trader at Zhejiang Nanhua Futures.


The concern about import difficulties led analysts to predict that Dalian's soybean futures would breach the CNY3,000/ton resistance level easily in the near future.


In the late session Tuesday, profit takers weighed on the market, as most contracts have been posting non-stop gains for almost three weeks.


But profit taking failed to erase the sharp gains registered earlier in the day.


Traders and analysts noted that fresh buying would push soybean futures even higher in the coming days, as the concern about imports had provided a strong incentive to potential buyers.


Besides the benchmark contract, the other eight soybean contracts rose by CNY16-CNY44/ton.


Dalian's soymeal futures saw aggressive buying amid the bullish sentiment at the exchange.


The benchmark November 2003 soymeal contract hit a record high of CNY2,259/ton, before settling CNY36/ton higher at CNY2,231/ton.


Trade volume in the Dalian soybean futures market rose almost 60% from Monday's 587,516 lots to 931,128 lots. Open interest declined to 694,750 lots from the previous 803,506 lots.


One lot is equivalent to 10 tons.