December 2, 2008

Tuesday: China soy futures settle down; cheaper global soy pull down local prices


Soy futures traded on the Dalian Commodity Exchange settled lower Tuesday (Dec 2), as cheaper imported soy weighed on local prices.


The benchmark May 2009 soy contract settled RMB56 lower at RMB3,139 a tonne.


A bumper domestic harvest and falling soy prices on the CBOT have been plaguing domestic soy.


However, industry participants said most soy crushers in major northeast producing areas have suspended production and stopped buying soy from farmers because domestic soy prices are still higher than global prices.


News that the government plans to buy more soy from the market did not boost sentiment much.


The State Administration of Grain and China Grain Reserves Corp. issued a joint statement to their local branches last night to buy additional corn, soy and paddy rice from the market to protect farmers' interests, said Liu Zhaofu, general manager of Longma Consultation, a Heilongjiang-based soy consultancy.


The government is expected buy an additional 1.5 million tonnes of soy from the northeast at RMB3,700/tonne, the same volume and price levels as an earlier purchase, he said.


But "the purchase may (actually) help US farmers rather than Chinese farmers," as much cheaper imported soy made domestic ones less competitive, said Huang Xiao, a manager at Capital Futures.


Imported soy are RMB1,000/tonne cheaper than domestic non-genetically modified soy in the same market, while domestic soy usually have to be at least RMB200/tonne cheaper than imported ones for soy processing plants in the northeast to make profits, said analysts.


Open interest for all soy contracts rose 20,800 lots to 624,188 lots Tuesday.


Trading volume rose to 584,226 lots from 428,546 lots Monday.


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


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


Contract         Settlement        Price         Change      Volume

Soybean         May 2009         3,139         Dn   56      584,226

Corn              May 2009          1,524         Dn   15      258,268

Soymeal         May 2009          2,262        Dn   53      412,160

Palm Oil          May 2009          4,684        Dn  124       97,750

Soyoil             May 2009          6,050        Dn  150      377,866
US$1=RMB6.8742 (Dec 4)

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