U.S. soybean futures are poised for a lower start to Tuesday's day session as traders continue to book profits amid slowing export demand and improved South American crop prospects.
In overnight trading, Chicago Board of Trade March soybean futures, the most active contract was 6 1/4 cents lower at $13.96 1/2 a bushel. New crop November futures were down 4 1/4 cents at $13.61 1/4. Analysts expected soybeans to open 5 cents to 7 cents lower.
The absence of South American production threats and signs of Chinese demand shifting to South America or to new-crop deliveries have left futures without support to justify previous price gains, analysts said. The decline in old-crop export sales in the past week and cancellation of sales to China and unknown destinations raised concerns that the market was achieving its objective of rationing near-term demand.
U.S. Department of Agriculture announced Tuesday private exporters reported the cancellation of 110,000 metric tons in sales of U.S. soybeans to unknown destinations for delivery in the 2010-11 marketing year.
"There are questions arising over actual U.S. soybean demand, with cumulative soybean exports running 2% ahead of a year ago, and while an improvement, are still 4% behind initial estimates," said Karl Setzer, analyst with MaxYield Cooperative in a market note. "This is mainly from China slowing their soybean bookings in recent weeks, a trend that may continue, as Chinese import authorities believe their imports will trail last year through the spring months," he added.
Demand from China, the world's top soybean buyer helped push soybean futures to two-year highs previously on concerns that strong demand from China was draining U.S. supplies.
Traders are also expected to book profits from big gains achieved previously, with the need to reduce risk magnified by improving Brazilian production prospects and Argentina crop conditions. 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 U.S. supplies in the spring of 2011.
Further weakness is seen carrying over from Monday's late declines, as fears the USDA will project a 10 million increase in all crop acreage at next week's Outlook Forum following Monday's release of baseline projections applies pressure.
However, precariously low projected end-of year supplies, and the need to keep prices at levels that will entice farmers to plant needed soy acres in the face of strong competition for acres from corn and cotton are seen limiting declines.
Insufficient increases in acreage will require higher-than normal crop yields come summer, if another year of tight supply is to be avoided. The uncertainty of 2011 acreage is supporting new crop futures, represented by the November contract.