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Sluggish demand pressures cash soy prices

John Walter 09/08/2011 @ 1:27pm

The realization of slower export demand and the approaching autumn harvest are promoting weaker soybean cash prices and basis levels.

Basis levels typically erode as harvest approaches, as grain buyers have adequate coverage to last until harvest progress increases.

There is no incentive for buyers to push prices, particularly with slow export demand providing little competition for nearby supplies, analysts say.

South America is capturing most of the world soybean export business, resulting in lower barge basis levels to the Gulf.

"Easing soybean CIF basis reflects not only a slowing Chinese buying pace but their preference for cheaper Brazilian soybeans," said Rich Feltes, vice president of research at Chicago Based brokerage RJ O'Brien in a market note.

Midday barge basis levels for shipment of soybeans to the Louisiana Gulf ranged from 10 cents to 20 cents over November futures, down 12 cents from Wednesday, according to data from the U.S. Department of Agriculture.

Industry analysts are concerned about the lost export business to Brazil in recent weeks, particularly with harvest gearing up and no strong draw for soy supplies, analysts said. There is also concern about soybean demand holding up in the face of a struggling world economy.

Meanwhile, commercial elevators are concerned about filling their empty storage space with grain, fearing they will have to boost cash prices in an effort to attract farmer selling.

Processors and ethanol plants that have not secured enough inventories to carry them through the fall harvest continue to report price premiums for corn supplies. Nevertheless, the premiums are slipping in unison with other basis levels.

In Indiana, the basis ranged from even with December futures to 20 cents over December futures, according to data from USDA. In Ohio, ethanol plants are paying from 20 cents to 25 cents over December futures.

-By Andrew Johnson Jr, Dow Jones Newswires, 312-347-4604, andrew.johnsonjr@dowjones.com

(END) Dow Jones Newswires

September 08, 2011 13:21 ET (17:21 GMT)

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