China soy futures settle mostly lower; more downside ahead
Soy futures traded on China's Dalian Commodity Exchange settled mostly lower Wednesday due to broad weakness in commodities, and analysts expect ample supply and pre-holiday liquidation to lead to further losses in coming days.
The benchmark May 2010 soy contract settled RMB10 lower at RMB3,701 a tonne.
Total trading volume for all soy contracts fell to 615,912 lots from 790,690 lots Tuesday (Sept 22).
Ample domestic supply, recent weakness in Chicago Board of Trade soy futures and a decline in the benchmark Shanghai Composite Index during the afternoon session Wednesday weighed on agricultural products, analysts said.
"The bounce in CBOT soy last night was largely due to the weak US dollar, so that also failed to offer much support today," said Li Xiaoli, an analyst at Beite Futures.
Market talk that part of the state soy reserves will be allocated to the local reserves of major producing regions also clouded the market.
The Heilongjiang Soybean Association said on its Web site late Tuesday that 1.95 million tonne of soy from state reserves will be transferred next month to local governments in the northeastern provinces and the Inner Mongolia Autonomous region with a subsidy of RMB210 per tonne.
The association didn't provide any further details, or clearly state the source of the information.
"The manager of the state reserves has to move the old beans out of the warehouse, as the new harvest is about to begin," said Wu Qiujuan, an analyst at Xinhu Futures.
If confirmed, this would act as a subsidy for crushers, as they would be able to buy beans from state reserves at a lower price, so the news added to downward pressure on the cash market, Wu said.
Soymeal and soyoil futures also settled lower.
Due to higher margin requirements ahead of the long local holiday break October 1-8, liquidation of positions expected over the next few days means further downside is very likely, Wu said.
US$1 = RMB6.82670 (Sep 22)
