Soybeans Drop Most in Week on Concern China Will Cancel Cargoes

Apr 11, 2014 3:34 pm ET

April 11 (Bloomberg) -- Soybean futures dropped the most in a week on concern that importers in China, the world’s biggest buyer, will cancel purchases as processing profit shrinks and banks withhold financing. Grains fell.

Importers may default on as much as 2 million metric tons of shipments, according to the U.S. Soybean Export Council’s Beijing office. Buyers defaulted on at least 500,000 tons from the U.S. and Brazil because of negative crush margins and difficulty getting credit, Reuters reported yesterday, citing two people it didn’t identify. Brazil is the largest shipper, followed by the U.S.

“China doesn’t want the beans, and now Brazil is ready to ship its crop” as the harvests nears completion, Chad Henderson, the president of Prime Ag Consultants Inc. in Brookfield, Wisconsin, said in a telephone interview. “The concern is that China will cancel more Brazilian cargoes and they will be diverted to the U.S.”

Soybean futures for May delivery fell 1.3 percent to close at $14.63 a bushel at 1:15 p.m. on the Chicago Board of Trade, the biggest decline for a most-active contract since April 2. This week, the price dropped 0.7 percent, snapping a three-week rally.

Crushing soybeans in China became unprofitable in March and was close to break-even today, according to data compiled by Shanghai JC Intelligence Co. That has prompted banks to withhold letters of credit from some purchasers, said Zhang Xiaoping, the U.S. council’s chief representative in China.

Monthly imports by China may fall to 5.5 million tons in June, July and August, Zhang said.

Wheat futures for July delivery dropped 0.3 percent to $6.6825 a bushel on the CBOT. The price fell for the second straight week with rain in the next week forecast to revive crops hurt by drought in the Great Plains.

Corn futures for July delivery declined 0.5 percent to $5.045 a bushel.

--With assistance from Rudy Ruitenberg in Paris and Phoebe Sedgman in Melbourne.