Farm Commodity Futures Tumble in China as Wen Pledges to Cool Price Gains

Agriculture futures slumped in China, with soybeans, cooking oils, rubber, cotton and sugar dropping the daily limit, as Premier Wen Jiabao promised to take steps to cool the fastestinflation in two years.

Soybeans and soybean oil fell 4 percent, the maximum allowed by the Dalian Commodity Exchange, to 4,337 yuan ($652) a metric ton and 9,396 yuan a ton. Palm oil plunged 5 percent. Cotton and sugar declined 5 percent in Zhengzhou and rubber decreased 5 percent in Shanghai.

“The government wants to curb excessive speculation without interfering with the fundamentals of supply and demand,” Tommy Xiao, analyst at Shanghai JC Intelligence Co., said by e-mail. Agricultural futures have surged in China, increasing the risk of a correction, he said.

China’s exchanges have introduced measures to cool speculation in futures markets. The Dalian bourse said last week it will curb “abnormal” trading to prevent price manipulation and other activities that disrupt an orderly market. The Zhengzhou Commodity Exchange and Shanghai Futures Exchange have announced similar steps.

Soybean futures jumped as much as 12 percent in Dalian this month and dropped 9.2 percent in the past four days, the biggest such decline since October 2008. Rubber soared as much as 28 percent in Shanghai, and fell 12 percent in the past four days, the most since December 2008.

Wen Pledge

Wen said yesterday the cabinet was drafting measures to counter excessive price gains, suggesting the government may raise interest rates and introduce price controls. Wen’s comments at a Guangzhou supermarket were broadcast on state television. He didn’t elaborate, beyond urging local governments to ensure market supply and order.

Inflation in October was 4.4 percent, boosted by a 10.1 percent increase in food costs, statistics bureau data show.

The government won’t “hastily” introduce tougher price- control measures, the Economic Observer reported yesterday, citing an unidentified official at the National Development and Reform Commission. The government is studying measures to curb inflation based on the “trend and cause” and will act according to the price law, the official was cited as saying.

“Administrative measures to interfere with the markets probably won’t be often used,” Shanghai JC’s Xiao said. The government is aware that futures trading can lead to excessive speculation as China experienced in the past, and that’s why it took action to further regulate futures trading, he said.

(Source: http://www.bloomberg.com/news/2010-11-17/agricultural-commodities-decline-in-china-as-wen-pledges-to-cool-inflation.html)