November 25, 2008

Tuesday: China soybean futures rebound as crude oil, equities rally


China's soybean futures traded on the Dalian Commodity Exchange settled higher Tuesday, with the soy complex riding the momentum of a rebound led by crude oil and equity markets.


The benchmark May 2009 soybean contract gained 0.9% to settle at RMB3,291 a metric tonne.


"The main reason for soybean's gain is the U.S., and most importantly, the gains in stocks and crude," said Dong Liang, an analyst with Hongyuan Futures in Beijing. "You have the dollar weakening too, and most other commodities rising."


The spillover from equity rallies and crude oil pulled Chicago Board of Trade soybean futures sharply higher Monday.


Soybean meal and vegetable oil futures on Dalian made strides Tuesday, with palm oil and soybean oil standing out with 3.7% and 3.3% gains respectively.


Crude oil is linked to soybeans because funds often trade in a basket of commodities and because soy oil is used to make biodiesel.


"U.S. grain prices rose the most in nearly four weeks as news of the U.S. government's rescue package for Citigroup boosted investor confidence," Commonwealth Bank of Australia said in a research note Tuesday.


"News that the U.S. Congress will approve an economic stimulus package for President-elect (Barack) Obama...also supported grain prices."


Agricultural futures on Dalian are consolidating at current prices, said Huang Xiao, an analyst with Capital Futures in Beijing.


Huang added China's corn futures, which bucked the commodities rally to fall 0.4% Tuesday, are more divorced from global markets than soybean.


"It fell, but it's not that much. Corn won't be making any big moves when other grains are rebounding. It can't grow too much, but it can't fall too much either."


Corn production this year is expected to rise by 2.4%, with exports sharply lower, pressuring the outlook for corn prices.


But domestic demand for the rest of the complex is rising ahead of the year-end holiday season, as many soy oil processing plants restart operations and move to replenish their stocks.


The open interest in all soybean contracts fell 18,366 lots to 608,480 lots Tuesday.


Trading volume fell to 501,636 lots from 593,334 lots Monday.


Tuesday'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       3,291       Up   29       501,636

Corn              May 2009       1,588       Dn    7       214,762

Soymeal        May 2009       2,387       Up   11       354,214

Palm Oil         Jan 2009        4,438       Up  160        59,788

Soyoil            May 2009       6,044       Up  192       264,658 


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