US wheat rises for 2nd day, soy rebounds on Fed move

SINGAPORE: Chicago wheat gained more ground on Wednesday, rising 1.7 percent, while soybeans bounced back and corn rose more than 1 percent, lifted by the US Federal Reserve's move to keep interest rates low for at least two years.

Asian stocks rebounded, following a jump in US shares, after the Federal Reserve made an unprecedented pledge to keep interest rates near zero, stemming a global equity rout for the time being.

"I think the Fed statement will give a boost to overall commodity markets as it is more like injecting confidence into the markets," said Ker Chung Yang, analyst at Phillip Futures in Singapore. "But there are uncertainties over the US economic growth and China, which has seen higher-than-expected CPI numbers."

Chicago Board of Trade actively traded November soy rose 1.2 percent at $13.15-1/2 a bushel by 0227 GMT, after touching a low of $12.82 a bushel on Tuesday, the lowest since March 17.

December corn gained 1.2 percent to $6.96-3/4 a bushel and September wheat gained 1.7 percent to $6.83-1/4 a bushel.

World stock markets had been tumbling since the start of August on fears of a slide back into recession for the United States, reinforced by a downgrade of the US credit rating on Friday, and the ever-expanding euro zone debt crisis.

The grain and oilseed markets suffered in sympathy with the selloff in global stocks and commodities, even though fundamentals for corn remain bullish, with tight supplies and damage to the US crop in July heat.

On Tuesday, front-month corn had lost more than 17 percent from a record high of $7.99-3/4 a bushel in June, while soybeans were down 11.6 percent from February 2011 peak of $14.55-3/4 a bushel. Wheat has lost more than a quarter of its value since climbing to $8.93-1/4 on February 9.

Investors are eyeing a US Department of Agriculture report on demand and supply of agricultural products.

The United States is likely to produce its second-largest corn crop this year, a Reuters poll showed, but the forecast is smaller than the record harvest seen just last month due to damage from rains and high heat.

American farmers planted the second largest corn acreage since 1944, but flooding along farmland adjoining the Mississippi and Missouri Rivers destroyed some of that crop.

And day after day of hot temperatures as the crop was reproducing, or pollinating, also cut into production prospects.

The weather has since turned benign with moderate temperatures and periodic rains in the US Midwest, which is boosting crops, especially soy, in its critical pod-setting phase.

Top global wheat importer Egypt on Tuesday bought a shipment from Russia in its sixth straight tender to purchase grain from the Black Sea region, which was bearish news for US wheat exporters.

Still, US wheat offers to Egypt were only about $4 per tonne lower than those from Russia after being $20 to $30 more expensive last month, and some traders are optimistic the United States will soon be more competitive in the export market.

Copyright Reuters, 2011