October 8, 2008

 

Wednesday: China soybean futures settle sharply down but off limit low
   

 

Soybean futures traded on the Dalian Commodity Exchange settled sharply lower Wednesday but off their lower limit as short sellers covered their positions to avoid mandatory liquidation.

 

The benchmark January 2009 soybean contract settled RMB144 lower at RMB3,499/tonne, down 4.0%.

 

Benchmark soybean futures, benchmark soymeal futures and benchmark palm oil futures all touched limit-down during the session.

 

Under the exchange's rules, whenever contracts hit lower limits for three sessions in a row, long position holders can apply for mandatory liquidation to be applied to short position holders after the close of the third session.

 

Short sellers covered their positions at the start of Wednesday's session to avoid mandatory liquidation, helping lift market prices.

 

But some set up new short positions later on, as they expect prices to fall further, said analysts.

 

"Today's trading showed that both short sellers and long position holders were leaving the market as the latter surrendered (exited the market)," said Li Dongji, an analyst at Guotai Jun'an Futures Brokerage.

 

As a result of today's fall, there could be a small rebound tomorrow, he added.

 

But analysts don't expect any rebound to last long, as long as market sentiment remains unstable.

 

Moreover, the fall in Dalian Commodity Exchange soybeans still lags behind their counterparts on the Chicago Board of Trade, said Chu Jianhong, an analyst at Chinatex Grains & Oils Import & Export Corp.

 

Benchmark CBOT soybean futures have fallen 20% since Sept. 26, the session before China's long National Day holiday, while the benchmark soybean contract on the Dalian exchange has only fallen 13% since then.

 

Open interest in all soybean contracts fell 78,700 lots to 257,324 lots Wednesday.

 

Trading volume rose to 1,287,932 lots from 24,254 lots Tuesday.

 

Corn futures settled higher, but soymeal futures, soyoil futures and palm oil futures all settled sharply lower.

 

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

 

Contract         Settlement        Price       Change        Volume

Soybean         Jan 2009          3,499       Dn  144     1,287,932

Corn             May 2009          1,663        Up   12        859,384

Soymeal         Jan 2009          2,967        Dn  130       400,118

Palm Oil          Jan 2009          5,626        Dn  242        59,636

Soyoil             Jan 2009          7,156        Dn  286       570,650