China makes largest cancellation of U.S. soy in 14 years

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China has scrapped purchases of 540,000 tons of U.S. soybeans, the U.S. Department of Agriculture said on Thursday, marking the largest such cancellation by the world's top importer of the oilseed in at least 14 years.

It was also the second cancellation this week. On Tuesday, the USDA said China had cancelled purchases of 300,000 tons, and traders said that another 120,000 tons that were scrapped by buyers the USDA did not specify were likely for China too.

Chicago Board of Trade soybean futures tumbled on the news, falling as much as 2.4 percent, 34-1/4 cents, to a low of $14.02-3/4 a bushel. At 9:48 a.m. CST (1548 GMT), futures were down 1.3 percent, or 17-3/4 cents, at $14.19-1/4 per bushel.

By law, exporters must report promptly the sale of 100,000 tons or more of a commodity to the same destination in one day. Sales of smaller amounts are reported on a weekly basis.

Traders said the cancellations were due to a likely bumper crop in Brazil, the world's second-largest soybean exporter, where China could book supplies at much lower prices.

Garrett Toay, risk management consultant at Toay Commodities Futures Group in Des Moines, Iowa, said China was likely cancelling extra U.S. soybeans it had purchased as insurance in the event of a poor crop in South America.

"They could have overbooked here as protection," he said, adding that it was likely that China was shifting some of its purchases to South America.

"China is assuming there is nothing wrong with the Brazilian crop," Toay said.

After some initial concerns over the weather hurting Brazil's soybean crop, the country seems to be on the path to harvesting a bumper crop early next year.

U.S. soybean export sales in the 2012/13 marketing year (Sept/Aug) totaled more than 30.3 million tons as of Dec. 13 - nearly 83 percent of the USDA forecast of 36.61 million.

The majority of the sales - almost 19 million tons or 62 percent - were to China.

USDA data showed that 3.1 million tons were sold to "unknown destinations," and traders believe a sizable part of the amount was bought by China.

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