November 20, 2008

Thursday: China soybean futures up on talk of 1 million tonnes government purchase plan


China's soybean futures traded on the Dalian Commodity Exchange settled slightly higher Thursday on speculation that the government may buy another 1 million tonnes of the commodity for its reserves, aimed at soaking up surplus and supporting prices.


The benchmark May 2009 soybean contract settled 0.2%higher at RMB3,289 a metric tonne.


Analysts said the government may buy the additional stock from major producing regions in the northeast at RMB3,700/tonne, extending, in the same top-producing areas, an exercise underway since late October to buy 1.5 million tonnes of domestic soybeans at that price.


Some analysts also said cheaper imports of soybeans have made the domestic crop less competitive, which could force the government to keep buying stock to prevent major price swings and protect farmers' interests.


The contract couldn't sustain gains made in the morning session because of losses during Asian trading of its counterpart on the E-Chicago Board of Trade electronic bourse, which fell on sliding U.S. equities and a stronger dollar, said Wang Xiaoguang of Galaxy Futures in Shanghai.


The soybean futures price rise early Thursday was also curbed by market expectations that domestic crop prices could continue to be less competitive even after additional government purchases.


"This would (continue to) make imports cheaper," said Gao Yanrong, of Shanghai's Dalu Futures. "That's going to make it difficult for farmers to sell domestically."


The overall mood on agricultural products is still clouded by gloom across the commodities complex.


"Commodities are still in bad shape, and we expect soybean prices will keep falling, though it may not be by much more," Wang said, adding soybean futures may consolidate around RMB2,800/tonne.


Cash domestic soybean prices in Heilongjiang, a major producing province, were largely unchanged from Wednesday.


Open interest in all soybean contracts fell 26,790 lots to 609,430 lots Thursday.


Trading volume rose to 1,237,226 lots from 737,692 lots Wednesday.


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


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


Contract        Settlement        Price        Change       Volume

Soybean        May 2009         3,289        Up    7      1,237,226

Corn             May 2009          1,600        Up    8         295,174

Soymeal        May 2009         2,485        Dn   38        596,048

Palm Oil         Jan 2009          4,370        Dn   64          79,790

Soyoil            May 2009         5,966        Dn  126        398,578

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