November 21, 2008

Friday: China soybean futures down after paring losses on rate cut talk


China's soybean futures traded on the Dalian Commodity Exchange settled lower Friday, with earlier losses pared in the afternoon following equities-led market speculation that Beijing may cut interest rates.


Battered U.S. markets and crude oil losses overnight ultimately took the benchmark May 2009 soybean contract 2.2% lower to RMB3,217 a metric tonne.


The bourse averted a sharper loss starting around midday, analysts said, when market chatter turned to a sharp rally in equities led by Hong Kong.


"The market's expecting some sort of financial policy change to be announced later today," said Kang Zhichao, of Nanhua Futures Co.


Soybean futures on CBOT dropped to four-week lows Thursday, succumbing to the tailspin in the Dow Jones Industrial Average and crude-oil futures.


Analysts said strong volume at Dalian Friday also saw traders taking some comfort in anticipation of government plans to increase its target volume for stockpiles of corn and soybeans to protect the farm industry.


"The market welcomed the news but because (the additional purchases were) not confirmed, prices haven't gone up that much," said Yang Fan, an analyst with Great Wall Futures in Shanghai.


"The downside is that there's a RMB400-RMB500/tonne arbitrage gap between imports and domestic prices, and we have to expect (domestic) prices to keep going down," Yang said.


Bearishness continued to characterize the overall mood on agricultural futures in Dalian, with some analysts expecting soybean to consolidate around RMB2,800/tonne.


Cash domestic soybean prices in Heilongjiang, a major producing province, were lower Friday on week.


The spot market fell across agricultural products, signaling pressure from cheaper imports as the government tries to prop up local prices.


Open interest in all soybean contracts fell 3,360 lots to 606,070 lots Friday.


Trading volume fell to 1,044,192 lots from 1,237,226 lots Thursday.


Corn futures, soymeal futures, palm oil futures and soyoil futures all settled lower.


Friday'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       3,217     Dn   72    1,044,192

Corn             May 2009       1,598     Dn    2       374,044

Soymeal       May 2009        2,388     Dn   97      440,046

Palm Oil        Jan 2009         4,202     Dn  168       49,790

Soyoil           May 2009        5,762     Dn  204     417,292

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