October 27, 2011

Agricultural commodities futures on Dalian and Zhengzhou commodity exchanges were mostly traded in narrow ranges on Wednesday (Oct 26) as investors lowered their risk appetite amid uncertain economic outlook while awaiting cues from the second EU summit.

CBOT grains declined a bit overnight as weakened confidence in US economy and concerns over EU debt threatened to dampen demands for agricultural products, and this also cast a negative impact on China's farm product futures market.

Soy futures traded on the Dalian Commodity Exchange rose marginally, with the most actively traded contract for September delivery up 0.18% to RMB4,419 (US$692)/tonne. However, the May soyoil contract ended 0.3% lower at RMB9,290 (US$1,455)/tonne.

Technical analysis showed that Dalian soy might not decline in the short term but would likely be range-bound in absence of favourable cues from fundamentals. Analysts predicted that soy and soyoil demand will increase in the fourth quarter for the traditional consumption peak season and this may lend support to prices then.

Zhengzhou sugar led the gains Wednesday, with the contract for May delivery up 1.4% to RMB6,815 (US$1,067)/tonne.

Zhengzhou sugar has risen for the fourth straight day boosted by a low level of state stocks, higher spot prices and ongoing floods in Thailand, the sixth biggest sugar producing countries in the world.

However, with policy regulation likely to further strengthen and international market still soft, Zhengzhou sugar lacks robust rise momentum and may maintain in the range of MRB6,500-7,000 (US$1,018-1,096)/tonne, analysts said.