November 19, 2008

Wednesday: China soybean futures settle up aided by gain in equities


Soybean futures traded on the Dalian Commodity Exchange settled higher Wednesday on spillover strength of a strong rally in equity markets in late session, amid a lack of fundamental leads.


With prices coming off by 40% from their record highs hit earlier this year, such short-lived rallies occur as traders are unwilling to do any further short selling at this moment, analysts said.


The benchmark May 2009 soybean contract settled 1.6% higher at RMB3,282 a metric tonne, after trading between RMB3,229/tonne and RMB3,336/tonne.


"Most commodities -- metals, agricultural products -- followed a rally of domestic equity markets, though there wasn't any strong supportive news," said an analyst at an international trading house in Beijing.


"Speculators would rather buy, than sell, for the time being. After all, prices have come off the peak by so much," he said.


The benchmark Shanghai Composite Index, which tracks both A and B shares, ended up 6.1% Wednesday, after a 6.3% decline Tuesday.


Some analysts speculate that as imported soybean prices are now much lower than the RMB3,700/tonne China is paying farmers for building its state reserves, the government may buy more domestic soybeans, than what was previously decided, to support prices.


The Chinese government said late October it is buying soybeans from the northeast, a major producing region.


"With more imports arriving at the ports, domestic prices will be under pressure, if there is no follow-up policies to support prices," said Liu Xinghua, an analyst at Great Wall Futures.


Corn futures settled little changed.


Spot market trading was very thin during the past week, as farmers waited for state reserve warehouses to make purchases at a higher-than-market price, traders said. They said buying has just begun, and should be in full swing in a week or so.


Wednesday's settlement prices in yuan a metric tonne and volume for all contracts in lots:


Contract      settlement       Price       Change       Volume

Soybeans     May 2009       3,282       Up  51        737,692

Corn            May 2009       1,592       Dn   5         202,184

Soymeal      May 2009        2,523       Up  15        546,166

Palm Oil       Jan 2009         4,434       Dn  10         68,920

Soyoil          Jan 2009         6,320       Up  30        327,148

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