U.S. soybean futures are expected to drift lower in early trading Friday, as traders reduce risk exposure due to global inflation fears and the threat of slowing demand.
CBOT soybeans are seen opening 5 cents to 7 cents lower.
In overnight trading, Chicago Board of Trade May soybean futures, the most active contract, was down 6 cents at $13.25. New crop November futures were down 7 3/4 cents at $13.37 1/2.
Futures could undergo more generalized selling early Friday as inflation data around the world may create another wave of anxiety among investors, said Bryce Knorr, analyst with agricultural publication Farm Futures, in a market note.
Investors remain cautious about buying into a market that is trading at historically high levels, particularly without a fresh demand push to accelerate rallies. China's March consumer inflation rate was 5.4%, the fastest rate in more than two years, sparking concerns the government may tighten monetary policy further and introduce tougher control measures on such items as food prices, which rose 11.7% from a year earlier in March. This will weaken demand for imported soybeans as crushers are forced to suspend operations due to low margins, said Xu Liang, an analyst with Shanghai East Asia Futures Co.
China is the leading importer of U.S. and global soybeans.
Concerns that China will cancel more sales amid a general belief in the market that poor processing margins have resulted in China pushing out delivery of South American soy purchases while switching some U.S. soybean purchases to cheaper priced Brazil soybeans.
Nevertheless, private exporters reported to the U.S. Department of Agriculture export sales of 165,000 metric tons of Soybeans for delivery to China during the 2011-12 marketing year, the USDA said Friday. The 2011-12 marketing year begins Sept. 1.
An aggressive harvest of a projected record Brazilian soybean crop continues to limit upside potential, as fresh South American supplies take away the urgency to curb U.S. usage.
The market is seemingly comfortable that South American supplies will relieve the strain on tight U.S. stocks signaled by slowing export demand.
However, the market is not expected to take out too much risk premium in the face of uncertain 2011 production prospects, as large crops and strong yields are needed to replenish precariously tight projected end-of-year inventories.
Zhoudong Shangguan contributed to this article