Grains extended losses Friday in Asian trading following a broad sell-off in commodities overnight due to signs of a tightening of monetary policy in China.

 

The benchmark Chicago Board of Trade March soybean futures contract was down 0.4% at $10.22 per bushel at 0832 GMT. March corn futures were flat at $4.17 a bushel.

 

However, reports released by the U.S. Department of Agriculture next week "will be the feature of this month," said Genichiro Higaki, head of the proprietary fund management team at Sumitomo Corp. in Tokyo.

 

In the meantime, "I think we can't be too bullish," given the overbought situation of some of the agricultural products, Higaki said.

 

On Thursday, China's central bank raised the interest rate on its three-month bills for the first time since August, signaling a change in policy focus towards reducing cash liquidity and managing inflation expectations.

 

The move sent most commodities futures lower, as traders were concerned about its impact on both fundamental and liquidity aspects.

 

Although increases in commodity prices recently have been driven more by liquidity than supply-demand fundamentals, the supply-demand situation still draws the baseline.

 

In Asian physical trading, Chinese imports of the U.S. soybeans are likely to be affected this month by new government regulations, traders said.

 

The Ministry of Commerce and the General Administration of Customs issued a joint statement Dec. 31 requiring importers to obtain a permit before shipping in soybeans.

 

The new regulation has resulted in temporary delays in unloading soybeans arriving at Chinese ports, as traders have to go through procedures to bring January arrivals in compliance.

 

However, market participants downplayed the long-term impact, saying preregistration of shipments doesn't iampose any significant barriers to imports.