November 20, 2003

Plunge in Soybeans & Wheat Futures Due To China's Cancelled Trip To US

Soybeans plunged in Chicago and wheat futures had their steepest decline in almost eight years on speculation that China may withdraw purchases of U.S. grain after the U.S. imposition of quotas on Chinese textiles.

Trade officials from China, the biggest buyer of U.S. soybeans, postponed a visit to the U.S. after the U.S. action. They were to discuss soybean and wheat purchases. China, which is expected to boost its soybean imports this year, has been increasing U.S. purchases to lock in prices that had risen 53% since late July.

"There's the demand rationing we were looking for," said Jim Byrne of Byrne Investment Services in Cleveland. "If it's found we're going to lose that export business to China, soybean prices would collapse."

Soybeans for January delivery fell 28.25 cents, or 3.6%, to $7.4875 a bushel on the Chicago Board of Trade. Futures have fallen 7.4% since reaching a six-year high of $8.085 on November 3 on strong export sales and reduced supplies caused by a drought in the U.S. Midwest.

Wheat for March delivery fell 23 cents, or 5.8%, to $3.77 a bushel in Chicago, the steepest one-day percentage decline since February 1996. Futures have fallen 6.2% since reaching $4.185 on November 13, the highest price in a year. Wheat is up 21% this year after drought reduced production in Europe and Ukraine, allowing the U.S. to boost exports.