March soybeans were down 4 1/2 cents late in the overnight session. China soybean futures were down 1.1%. The Malaysian palm oil futures market was closed yesterday, but prices did fall 3.6% in overnight trade. Outside market forces looked slightly positive overnight with a weak tone to the US dollar, higher energy markets and firm equity markets. The long liquidation selling trend continued overnight as traders saw an improving production outlook for South America and a shift in China's demand to South America as negative factors. Talk of the overbought condition of the market and news of potential expanding planted area for most key grain crops have added to the selling pressures. This helped drive March soybeans to the lowest level since January 11th overnight. While February imports of soybeans to China are thought to be slow due to the New Year's holiday, the National Grains and Oils Information Centre in China is forecasting March and April imports to be close to 3 million tonnes each, down from 4.0 and 4.2 million last year. With soybean oil trading below palm oil, traders see some increased demand for soybean oil by China and other key importers. March soybeans fell sharply yesterday and closed near the low end of the range for the year. Ideas that China is shifting its soybean purchasing from the US to Brazil and continued talk of record high production for the advancing harvest in Brazil helped to pressure the market early. In addition, the USDA announced that an unknown destination cancelled 110,000 tonnes of US soybeans for 2010/11 delivery, Some traders believe this could be China. March meal fell to its lowest level since January 12th. Traders remain concerned with the overbought technical condition of the market as well after Friday's Commitment of Traders report showed that large traders held a near record net long position in soybeans. March oil closed down for the 4th session in a row following the February 10th key reversal. Egypt tendered for 25,000 tonnes of soybean oil and 15,000 tonnes of sunflower oil overnight. Rains continue to be in the forecast for Brazil. This might slow the harvest, but most growing areas are not ready to harvest for another 2-3 weeks. Higher temperatures are expected for a few more days in Argentina's growing areas, but more rain and cooler weather later this week is seen as beneficial to the crop. Basis levels have remained steady at the Gulf despite the recent sharp sell-off.