September 10, 2003



China Soybean Futures Settle Down On Profit Taking, Port Stocks, SARS

China's Dalian Commodity Exchange soybean futures settled lower Wednesday, as profit taking by long position holders erased part of the gains accumulated over the past five trading days.


"Profit takers began selling aggressively at the opening bell, as any price above 2,500 yuan ($1=CNY8.28) a metric ton is considered pretty profitable," said a trader at Shanghai Dalu Futures.


Futures were pressured further by market talk that imported soybean stocks at port warehouses were increasing.


"It is said the total volume has reached around 2.96 million tons, which is large enough to meet domestic demand in the short term," the Dalu Futures trader added.


The exact volume of soybean stocks at Chinese ports is unavailable, as the government usually doesn't release the figures to the public.


Besides, some traders believed the re-emergence of SARS in Singapore had put psychological pressure on the agricultural products market, as the downstream feed industry had been severely hit by the SARS outbreak just a few months ago.


"People recalled how the horrible disease drove consumers away from eating meat and poultry, as they speculated the virus has its origin in animals," said a trader at Zhejiang Tianma Futures.


Usually, lower soymeal demand from feed companies leads to lower demand for soybeans from crushers, as soymeal is the sole byproduct and key profit source of soybean processing.


Psychological pressure induced by SARS weighed on Dalian's soymeal futures as well, pushing prices to settle mostly lower.


The benchmark January 2004 contract lost CNY15/ton to CNY2,189/ton, after trading between CNY2,179-CNY2,212/ton.


In the soybean futures market, all nine soybean contracts traded in Dalian fell by CNY1-CNY23/ton, with the most heavily traded January 2004 contract slipping CNY11/ton to CNY2,536/ton.


Total trading volume in the Dalian soybean futures market declined to 321,646 lots from Tuesday's 348,278 lots.


Open interest for soybean futures fell to 771,884 lots from the previous 777,934 lots. One lot is equivalent to 10 tons.
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