Soybeans hold firm with little respite for parched Argentina

PARIS/SYDNEY: Chicago soybean futures edged higher on Monday, holding near their highest since July 2016, as weather forecasts showed little rain relief ahead for drought-affected grain belts in major exporter Argentina.

Gains were modest, with a strong dollar and uncertainty over US-China trade relations encouraging the oilseed market to consolidate after last week's rally.

Wheat was also steady, halting Friday's 3 percent drop, as drought in the US plains underpinned prices for the cereal.

Corn was almost unchanged.

The most active soybean futures on the Chicago Board of Trade were up 0.2 percent at $10.73-1/4 a bushel at 1251 GMT. In the previous session it reached $10.82-1/2 a bushel, the highest since July 14, 2016.

"Above all it is the drought in Argentina that is driving up prices. The Argentinian crop is set to be the worst in six years," Commerzbank analysts said in a note.

The deepening drought in the Pampas grain belt has led forecasters to cut estimates for the forthcoming Argentina soybean crop, prompting investors to raise their long position in Chicago futures.

Private analytics firm Informa Economics on Friday cut its forecast for Argentina's 2017/2018 soybean harvest by 7 million tonnes to 44 million tonnes.

But analysts have also set an expected drop in Argentine output against a bumper crop being harvested in Brazil and the risk that international trade tensions could disrupt massive Chinese imports of US soybeans.

US President Donald Trump announced last week that he would impose hefty tariffs on imported steel and aluminium to protect US producers, risking retaliation from major trade partners such as China, Europe and neighbouring Canada.

"Soybeans remain the focus as supply tightens," said Tobin Gorey, director of agricultural strategy at Commonwealth Bank of Australia. "The founder of the New Hope Group, one of China's biggest pig-breeding companies, said so on Friday. But he also said they will have to find alternative feed sources if US soybeans become ensnared in the dispute."

The most active CBOT wheat futures climbed 0.3 percent to $5.01-1/4 a bushel. They had closed 3 percent down in the previous session in a pullback after touching their highest level since last July at $5.18-1/2.

Chicago corn was unchanged on the day at $3.85-1/4 a bushel.

World shares slipped for the fifth straight day on Monday, curbed by the prospect of the global trade spat and political instability in Europe after Italy's inconclusive election at the weekend.