October 9, 2008

  

Thursday: China soybean futures settle slightly lower despite rate cuts
     

     

Soybean futures traded on China's Dalian Commodity Exchange settled slightly lower Thursday despite local interest rate cuts and the globally coordinated central bank rate cuts overnight.

  

The benchmark January 2009 soybean contract settled RMB12 lower at RMB3,487 a metric tonne, or down 0.3%.

 

The contract was trading up and down in a very tight range around the previous settlement price, showing that the market remained cautious despite a slight reduction in risk following a mandatory liquidation Wednesday.

 

The People's Bank Of China said late Wednesday it will cut benchmark deposit and lending rates by 27 basis points each as of Thursday.

 

Beijing will also cut banks' reserve requirement ratio by 50 basis points effective Oct. 15, meaning banks will be able to lend more as they are required to park less of their reserves with the PBOC.

 

However, the boost to liquidity from the rate cuts is likely to be limited, analysts said.

 

"Liquidity comes along with confidence, and liquidity is tight where there is no confidence," said Li Dongji, an analyst at Guotai Jun'an Futures Brokerage, adding that the market is very concerned about global economy as coordinated the global rate cuts showed the central banks' level of anxiety.

 

Lower freight fees and a possible appreciation in the yuan also added to the downward pressure on prices, said analysts.

 

Gu Jianjun, an analyst at Jinyuan Futures, expects the benchmark soybean contract to move between RMB3,400 and RMB4,300 a metric tonne in the 2008/09 crop year that began this month.

 

Open interest in all soybean contracts increased 83,346 lots to 340,670 lots Thursday.

 

Trading volume rose to 2,027,554 lots from 1,287,932 lots Wednesday.

 

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

 

Soyoil futures settled mixed, but the benchmark contract settled slightly higher.

 

Futures are taking a breather after sharp falls earlier this week, but global rate cuts won't turn the financial situation around quickly, so they are unlikely to help sentiment much, said Cui Ruijuan, an analyst at Guangfa Futures Brokerage.

 

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

    

Contract        Settlement        Price        Change        Volume

Soybean         Jan 2009         3,487        Dn   12      2,027,554

Corn             May 2009         1,669         Up    6         391,332

Soymeal        Jan 2009          2,895        Dn   72      1,173,284

Palm Oil         Jan 2009          5,550        Dn   76        100,068

Soyoil            Jan 2009          7,168        Up   12         638,384