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Soybeans tumble to 7-week low as long liquidation continues

Published 05/14/2012, 06:02 AM
Investing.com - Soybean futures were down sharply for a second day during European morning trade on Monday, tumbling to the lowest level since late March as growing concerns over the possibility of a Greek exit from the euro zone prompted investors to cut their exposure to riskier assets.

On the Chicago Mercantile Exchange, soybeans futures for July delivery traded at USD13.7938 a bushel during European morning trade, tumbling 1.85%.  

It earlier fell by as much as 1.95% to trade at USD13.7863 a bushel, the lowest since March 29.

Soy prices plunged 3.6% on Friday, the biggest one-day slide in more than seven months, as investors continued to liquidate long positions to lock in gains from an impressive rally that took prices to a four-year high of USD15.1237 a bushel on May 2.

According to market participants, soy’s losses accelerated after prices broke below their 40- and 50-day moving averages, triggering fresh sell orders amid bearish chart signals.

Soybean prices rallied nearly 19% since the beginning of February, and rose almost 6.5% in April, as market sentiment has been dominated by concerns over distressed crops in major South American soy growers and amid indications demand for U.S. soy from top consumer China remains strong.

However, prices are down more than 8% in the past nine sessions, with market analysts expecting an ever deeper drop heading into the summer, as the soy harvest in South America nears completion and higher prices eventually reducing the amount of Chinese purchases.

The bearish sentiment carried over to Monday’s session, with broader market risk aversion exacerbating losses.

Investors continued to monitor political developments in Greece, as the debt-laden country struggles to form a coalition government following last weekend’s elections, fanning fears over a potential Greek default and eventual exit from the euro zone.

Market sentiment came under further pressure amid fears over a deeper-than-expected slowdown in top soy consumer China, following the release of a flurry of disappointing data late last week.

The heightened sense of risk aversion prompted investors to shun riskier assets, such as stocks and commodities, and flock to the relative safety of the U.S. dollar.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.35% to trade at 80.70, the highest since March 15.

A stronger dollar reduces the appeal of U.S. crops to overseas buyers and makes commodities less attractive as an alternative investment.

Elsewhere on the Chicago Mercantile Exchange, wheat for July delivery fell 0.5% to trade at USD5.9475 a bushel, while corn for July delivery declined 0.65% to trade at USD5.7738 a bushel.

Grain traders were looking forward to the U.S. Department of Agriculture’s weekly planting progress report after Monday’s closing bell on the CBOT.

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