July 13, 2011

Soy futures on the Dalian Commodity Exchange snapped a two-day rally Tuesday (Jul 12) in a day of broad-based declines, weighed down by a stronger dollar and lingering concerns over Greece's debt crisis.

The most actively traded May soy contract settled 0.4% lower at RMB4,577 (US$708)/tonne.

On Tuesday, the euro fell to its lowest level against the dollar in four months, sending crude oil down 1.6% in Asian trading.

However, the market expects a bullish USDA report on soy acreage and supply later in the day to cap losses.

But soy's short-term upside is limited as oversupply and concerns over more inflation-combating measures will continue to pressure prices, experts said.

"In the longer term, we are still bullish on soy based on fundamentals," they added.

This year's domestic output is expected to fall 7.9% to 14 million tonnes due to sharply reduced acreage, the state-controlled China National Grain & Oils Information Centre (CNGOIC) said in its May estimate.

Rising demand for soymeal, a key raw material in animal feed, is expected to underpin soy prices in the near term as breeders are increasing hog production amid high profit margins, analysts said.

Chinese grain authorities failed to attract any bids for an auction of 300,414 tonnes of soy Tuesday, indicating weak demand, the CNGOIC said.