Soybeans Set for Second Weekly Drop as Recession Curbs Demand

By Jae Hur

Feb. 20 (Bloomberg) -- Soybeans are poised for the second straight weekly decline and corn is set to drop for a seventh week on speculation the global economic slowdown may reduce demand for food, animal feed and alternative fuel.

The MSCI Asia Pacific Index dropped as much as 2.4 percent as the deepening global recession raises bad-loan costs and hurts profits. U.S. stocks dropped, sending the Dow Jones Industrial Average to a six-year low. Soybeans touched an eight-week low and corn fell as low as a two-month low this week.

“The declining economy has put pressure on the grains and oilseed complex,” Takaki Shigemoto, an analyst at Tokyo-based commodity broker Okachi & Co., said today by phone.

Soybeans for May delivery were 0.75 cent up at $8.8675 a bushel in electronic trading by 1:40 p.m. Singapore time after touching $8.8275, the lowest for a most-active contract since Dec. 23. The contract lost 7.2 percent this week, the biggest such drop since Dec. 5. Prices reached a record $16.3675 in July.

Corn for March delivery was unchanged at $3.5325 a bushel after gaining 1.1 percent yesterday. The contract declined 2.8 percent this week. Futures reached a record $7.9925 on June 27.

Soybeans were also under pressure amid speculation that a sharp drop in domestic soybean meal prices in China, the world’s top importer of the oilseed, may force some buyers to cancel their previous purchases from the U.S., Shigemoto said.

India’s exports of animal feed made from soybeans may drop to 4.5 million tons in the year ending Sept. 30, less than the 5 million tons forecast by the industry in November, Davish Jain, Chairman of the Central Organisation for Oil Industry and Trade, a processors’ group, said.

Export Taxes

Argentine farmers will halt soybean sales before a scheduled meeting with government representatives on Feb. 24, farm leader Mario Llambias said. Llambias, speaking in Buenos Aires, said export taxes will be among subjects on the agenda for the meeting.

Argentina, the world’s second-biggest exporter of corn and third-biggest for soybeans, withheld grains and blocked highways for four months last year to protest a plan to raise taxes beyond the 35 percent previous rate.

Wheat for May delivery advanced as much as 0.8 percent to $5.3525 a bushel and traded at $5.325 by 1:47 p.m. Singapore time. The contract touched $5.22 yesterday, the lowest since Dec. 16. Prices reached a record in February 2008.

China lowered the severity of a drought warning after the worst dry spell in 50 years eased following rain in northern wheat-growing areas and implementation of relief measures.

The drought warning was lowered to level two after the area affected by drought in eight provinces dropped by more than half from the peak, the farm ministry said in a statement.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net