US corn, wheat edge up but soy hits 10-month low

LONDON: US corn and wheat prices edged up on Monday, regaining some ground after last week's steep setbacks, while soybeans slid to a fresh 10-month low as investors remained wary of commodities as global economic woes heightened risk aversion.

Wheat prices have been underpinned by drought in the US Plains hard red winter wheat region and much of Ukraine's winter grain-sowing area while corn has benefited from further downward revisions to the outlook for the US crop.

"Grains have been the leaders (strongest performers) during the big-sell off and we know they still have supportive fundamentals. That is why they have not fallen as much as the others," Romain Lathiere, fund manager with Diapason Commodities Management said.

Chicago wheat prices has fallen about 14 percent so far this month and corn around 15 percent, less than many other commodities including LME copper which has lost 22 percent and ICE coffee which is off 19 percent.

Commodities markets have fallen with investors increasingly risk averse as concerns about the global economic slowdown and the debt crisis in the euro zone deepen.

Lathiere said there was scope for further losses.

"If you look at many charts you will see we are breaking many long-term support levels and this is the fear I have for today," he said.

"For the moment it can be a good time to close or reduce any short positions as we had such as quick drop down but I wouldn't initiate any long positron right now and I think I'm not the only one."

December wheat on the CBOT rose 0.8 percent to $6.44 a bushel by 1133 GMT while December corn climbed 1.1 percent to $6.45-1/2.

CORN FAVOURED

"We remain constructive on the ag space, particularly from current levels, with corn still our favorite commodity," Morgan Stanley said in a market note on Monday.

"However, concerns of EU contagion have tempered the upside, particularly in soybeans and wheat," the investment bank added lowering its 2011/12 soybean price forecast to $14.25 a bushel.

Milling wheat futures in Paris also edged up with November 1.00 euro or 0.5 percent higher at 192.50 euros a tonne.

"On the fundamental side, we have had a pretty strong pullback in the last 10 days and people will sit back to see if that generates some demand," said Brett Cooper, a senior manager of markets at FCStone Australia.

Soybeans extended recent losses with November down 0.5 percent at $12.51-1/2 a bushel after earlier trading down to $12.26, the lowest level for the front month since November 2010.

"The world has plenty of beans and China will likely use reserves to keep prices down rather than grow US imports," Shawn Hackett of Hackett Financial Advisors said in a market update.

Private forecaster Informa Economics on Friday cut its estimate for 2011 US corn production to 12.62 billion bushels from 12.711 billion, while raising its US soy harvest estimate to 3.092 billion bushels from 3.061 billion.

Morgan Stanley said it remained positive in the medium-term outlook for soybeans on expectations of firmer demand and slower South American acreage growth in 2011/12.

Copyright Reuters, 2011