August 20, 2008

 

China soy futures settle up, rebound may not sustain

   

Soybean futures traded on China's Dalian Commodity Exchange settled higher Wednesday on higher cash soyoil prices.

 

The benchmark January 2009 soybean contract settled up RMB86, or 2.1%, at RMB4,261 a metric tonne, after trading in a range of RMB4,215-RMB4,332/tonne.

 

A RMB200-RMB300/tonne gain in cash soyoil prices Wednesday helped to boost soybean and soy product prices in the afternoon session.

 

Some new funds entered the market as investors think prices may have already hit a bottom for the current round of losses, said analysts.

 

Open interest in all soybean contracts at the end of the day was at 413,430 lots, up 31,818 lots from Tuesday.

 

The market is likely to consolidate in the near term, but uncertainties related to the dollar, crude oil prices and global soybean output may push prices to test lower levels in the longer run, said Wang Xiaoguang, an analyst at Galaxy Futures.

 

Concerns about the global economy and the recent strength of the dollar have drawn funds back into dollar and bonds.

 

Soyoil futures and palm oil futures settled higher, after their benchmark contracts both touched their limit-up levels briefly during the session.

 

Corn prices and soymeal prices were also higher.

 

The rebound in corn prices after a big recent decline may not last, however, as cash corn prices have been weak lately.

 

Cash corn prices were lower due to weak demand, as a surge in feedmeal prices has eaten into the profits of the livestock and poultry industry, forcing them to curb purchases, said Lv Yang, a trader at Jilin Grains Center.

 

China's State Administration of Grain has ordered the allocation of 519,500 metric tonnes of corn from the producing areas of the northeast to the southern region to try to tame prices, showing the government's resolve to further control grain prices in order to curb inflation.

 

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

Soybean          Jan 2009           4,261          Up    86       1,219,428

Corn                Jan 2009           1,727          Up   14          515,062

Soymeal          Jan 2009           3,562          Up   70        1,023,036

Palm Oil           Jan 2009           7,790          Up 190             27,114

Soyoil              Jan 2009           9,108          Up 238           561,754