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Soybeans fall on weather, China worries

05/23/2012 @ 3:18pm

Soybean futures fell 1.4% to a nearly two-month low, as weather forecasts improved for U.S. crops and traders worried about signs of slowing Chinese demand.

The decline extended a recent slide in U.S. soybean prices. Soybean futures peaked at the end of April after rallying for months as forecasters repeatedly cut their estimates for output in major producers Brazil and Argentina, because of a drought. Prices have since eased as some speculative buyers have exited the market and the U.S. growing season has gotten off to a fast start.

Prices fell Wednesday after traders in China said some buyers there cancelled import cargoes for previous soybean orders. The cancellations come as margins have turned negative for Chinese soybean processors, cutting into their demand for raw soybeans and reducing the prospect that current tight global supplies could slip to uncomfortably low levels later this year.

"Chinese cancellations and improved weather teamed up for a very bad combo today," said Ken Morrison, St. Louis-based publisher of the Morrison On The Markets online newsletter.

Soybeans for July delivery fell 19 3/4 cents to $13.62 1/2 a bushel at the Chicago Board of Trade, the lowest price for the front-month contract since March 29, and down 9.3% from a nearly four-year high reached April 30. July soybean oil settled down 1.55 cents, or 3.1%, at 48.91 cents a pound.

Other commodities, including crude oil and gold, also came under pressure Wednesday, as investors worried that Greece could exit the euro zone and upend the continent's economic outlook.

Traders in China said Wednesday that Chinese soybean importers have cancelled import cargoes scheduled for delivery in the next few months, because they fear a recent fall in prices that has wiped out their processing margins may extend further.

Prices for soybean meal and soybean oil, the products created when soybeans are crushed, have fallen in China. Those declines have made it a loss-making proposition for processors to crush the soybeans they bought earlier at high prices.

The size of the cancellations wasn't clear. But Chinese buyers cancelling or deferring shipments of soybeans would make more supplies available globally, pushing prices down even if the amounts involved are relatively small, analysts said.

The cancellations come as traders are already worried that soybean demand could weaken in China, the world's largest importer of the oilseeds.

"There's concern about Chinese demand because of a slowdown in their economy," said Dan Cekander, director of grain research at commodities-brokerage NewEdge USA LLC in Chicago.

Soybean futures also fell because of favorable conditions for the U.S. crop. Prices rose last week as forecasters predicted hot, dry weather in the Midwest, but forecasts since have shifted to call for rain and cooler temperatures next week.

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