Soybean prices tumbled, dragging grains lower too, after China unveiled its biggest cancellation of import order since at least the 1990s, fueling fears over demand from the top soybean importing-country. However, prices subsequently pared losses amid ideas that move may have been little more than an accounting trick.

Soybean futures for March tumbled 2.3% back below $14 a bushel after the US Department of Agriculture revealed that China had scrapped purchases of 540,000 of US soybeans. The cancellation by the world’s top soybean importer represented the largest since at least the 1990s.

And it followed the ditching of a further 300,000 tons in orders earlier in the week by Chinese buyers, plus a further 120,000 tons scrapped by an unknown importer, which many believe was China too. The cancellations stoked concerns over Chinese demand which have been given extra weight by declines in futures on the country’s own Dalian exchange, where soybeans have dropped by 2.0% in the last two sessions, soy oil 2.5% and soy meal 3.2%.

However, Roy Huckabay, executive vice-president at broker Linn Group, said that there may be more to the Chinese move than first appears, with the cancellations potentially relating to a loose contract signed early in the year, rather than conventional orders.

A Chinese delegation in February signed an agreement to buy 13.4m tons of soybeans in a contract which does not technically count as a sale, but typically leads confirmed deals. “When China needs something to bring soybean prices down, it can cancel some of these orders,” Mr. Huckabay told Thursday’s cancellation appears “just an effort to manipulate prices”, rather than representing a ditching of underlying physical supplies.

Indeed, the USDA separately on Thursday, in a much-watched weekly export sales report, announced fresh orders of soybeans by China, totaling 474,200 tons. “Even with today’s cancellations factored in, Chinese still has 193m bushels (5.3m tons) of soybean orders left on the books,” Mr. Huckabay said.

Chicago soybeans for March stood at $14.08 ¼ a bushel, down 1.6% on the day, in late morning deals. Chicago corn for March stood at $6.95 ¼ a bushel, down 1.1% on the day, but half the losses chalked up earlier, when the lot fell to a five-month low of $6.87 ½ a bushel. Chicago wheat for March stood at $7.90 ¾ a bushel, down 1.9% on the day, but above an intraday low of $7.82 ½ a bushel, the lot’s weakest since June.

Weakness spread to foreign markets too, where January canola dropped to Can$572.20 a ton in Winnipeg at one point, the lowest price in nearly 10 months. In Paris, rapeseed for February dropped to E441.75 a ton, a price not seen since the first trading day of 2012, before recovering some ground to close at E446.25 a ton, a decline of 1.1%.

U.S. soybean export sales in the 2012/13 marketing year (Sept/Aug) totaled more than 30.3 million tons as of December 13 – nearly 83% of the USDA forecast of 36.61 million. The majority of the sales – almost 19 million tons or 62% – were to China.

USDA data showed that 3.1 million tons were sold to “unknown destinations,” and traders believe a sizable part of the amount was bought by China.

Source: Dec 2012

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