September 28, 2007

Soy futures in China's Dalian soar on lower expected supplies

 

 

Soy futures on China's Dalian Commodity Exchange reached 897,500 lots as of September 25, the highest since 2006.

 

A total of 520,000 tonnes of soy under A0709 contract were delivered last Friday.

 

Soy futures settled at RMB 1.86 billion (US$247.7 million), an all-time high in the bourse.

 

Tight soy supply and news of lower output prompted dealers to hold soy positions. Analysts are bullish on soy futures as they believe rising import costs would hold back imports, thus failing to ease the tight supply at home.

 

Import costs have risen 45 percent compared to the previous year ago due to higher ocean freight charges and rising soy price on the Chicago Board of Trade (CBOT).

 

Higher import charges is met by lower output at home.

 

The China National Grain and Oils Information Centre expects the country's soy output to be lower by 1.5 million tonnes to 14.4 million tonnes this year.

 

At the same time, China's soy imports have slowed down in recent months.

 

Although soy imports in the first eight months of the year rose by 1.8 percent compared to last year, it was far lower than expected, prompting authorities to cut soy duties from 3 percent to 1 percent.

 

Dalian's most active soy A0805 jumped 31 points to RMB 4,099 per tonne.

 

Other agricultural futures are also trading higher on Dalian and Zhengzhou Commodity Exchanges.