U.S. soybean futures are poised for a lower start to Tuesday's day session, as investors continue to shed risk on the uncertainty over global economic growth and Japanese nuclear woes.
In overnight trading, Chicago Board of Trade May soybean futures, the most active contract, were down 12 cents at $13.28. New-crop November futures were down 16 1/2 cents at $12.91 1/2. Analysts expect soybeans to open 13 to 16 cents lower.
Global economic uncertainty is expected to produce another round of risk aversion, with tumbling prices across broader asset classes enticing investors to reduce exposure in global markets.
Concern that one of Japan's nuclear power plants is leaking radiation weighed on prices overnight amid concerns that Japan's near-term demand will drop for all commodity products, analysts said.
Futures look ready for a sharply lower open this morning, as investors around the world began dumping risky assets overnight when news of Japan's damaged nuclear reactors grew more frantic, said Bryce Knorr, analyst with Farm Futures.
A drop in Japan's stock market sparked the declines, as Japan's Nikkei stock market lost 10% of its value. Crude oil futures recently were down 3.5% or $3.50 a barrel, with silver futures down 5% and gold down 2.6% in early trading.
Investors are also cautious of risk exposure amid political unrest in the Middle East and North Africa, and favor exiting some riskier positions in the absence of fresh supportive news.
Meanwhile, further weakness is anticipated from prospects for larger South American production and increasing harvest pressure in Brazil.
Brazil and Argentina are the world's second- and third-largest producers of soybeans, respectively, behind the U.S. and are counted on to relieve the strain on tight U.S. supplies.
However, if prices continue to hold above Friday's lows, the market is expected to find some support from end user buying, as projected end of year supplies are tight and soybeans remain in a battle for 2011 planted acres with corn and cotton in the U.S. Delta.
Insufficient increases in acreage will require higher-than normal crop yields come summer, if another year of tight supply is to be avoided.
Traders anticipate Japan's nuclear issues will have a more positive effect on demand longer term, as consumers will look for safe imported food supplies.
"Normally, radiation emissions are seen as bullish to grain and meat markets as consumers in a developed impacted country seek known safe supplies of food," said AgResource President Dan Basse in a market note.
"If Japan's farmland is contaminated by radiation and it cannot be used for years, it would expand their import demand of meats and food grains," Basse added.