January 8, 2010

US soy futures down on fears China buying will slow

In the midst of concerns that China's decision to raise interest rates could restrict purchases by the world's top buyer of soy, US soy futures fell 3.1% on Thursday (Jan 7).

China's central bank surprised markets on Thursday (Jan 7) by raising the interest rate on its three-month bills for the first time since August. The decision came just one day after the bank promised to keep credit growth in check.

The move cast a pall over most commodity markets, many of which have been supported by demand from China during the past year amid the economic chaos around the globe.

There is market talk that the government is likely to tighten credit, which has driven down prices of white sugar and soy products, said Liang Yong, a researcher with Galaxy Futures in China's Heilongjiang province.

Wheat futures were also weakened, dropping 1.7%, as traders locked in profits following Wednesday's (Jan 6) rally, which pushed prices to their highest levels in more than a month.

Expectations of large inflows by investment funds in the coming days have supported wheat prices, despite plentiful global stocks and poor export demand.