October 24, 2011


CBOT strength supports China's farm produce futures prices


Agricultural commodities futures on Dalian and Zhengzhou commodity exchanges Friday (Oct 21) posted an overall rise tracking CBOT overnight, with edible oils leading the gainers.


Uncertainties in global economic situation may continue to bother investors' sentiments and exert pressure on the commodity market, analysts said.


Chinese central bank, the People's Bank of China, on Thursday cut the auction yield of three-year bills by one basis point to 3.96% amid the hot-red market demands, which seemingly foretells that the country's monetary policy may be relaxed to some extent.


Boosted by an overnight rise on CBOT, soy futures traded on the Dalian Commodity Exchange halted the decline and picked up. However, fundamentals of the soy market have not seen much change, with global supply not tight. Systematic risk in macro economy and trend of surrounding markets are main factors to affect soy prices in the short term. Technical analysis showed that Dalian soy is still in the downward channel.


The benchmark May soy contract rose 1.43% to RMB4,258 (US$667)/tonne. The May soy oil contract ended 1.73% higher at RMB9,190 (US$1,439)/tonne.


The bellwether May cotton contract traded on the Zhengzhou Commodity Exchange touched this year's new low of RMB19,850 (US$3,109)/tonne before rebounding and closing 0.4% higher at RMB20,040 (US$3,195)/tonne.


Analysts said that Zhengzhou cotton may continue to stay at the bottom of around RMB20,000 (US$3,132)/tonne until it gets cues from macro economy and downstream demand.


The state stockpiler China National Cotton Reserves Corporation purchased 1,760 tonnes of cotton for reserves this week. The state stockpiling programme is showing its effects. The purchase price of new cotton crops maintains at about RMB20,000/tonne and the stable price is good for both cotton growers and buyers.


Zhengzhou sugar contract for May delivery edged up 0.53% to RMB6,579 (US$1,030)/tonne along with a moderate rise in spot prices.


As new beet sugar produced in north China is coming onto the market and a new round of reserve sugar auction is expected to be held soon, sugar prices are likely to decline in the short term. However, the marketing year of 2011-12 may still see slightly tight supply and this will support prices at a high level.

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