Corn, soy surge as NAFTA revamp overshadows big supplies

CHICAGO: US corn and soybean futures rallied on Monday, reversing the prior session's steep losses, after the United States, Canada and Mexico announced they have reached a deal on a trilateral pact to replace NAFTA.

Corn gained nearly 3 percent and soybeans rose 2 percent as news of the trade agreement, reached over the weekend, eased concerns that the United States would exit the North American Free Trade Agreement pact that has propelled U.S. crop export growth for a quarter century.

The trade news overshadowed Friday's bearish U.S. Department of Agriculture report that showed larger-than-expected stocks of both commodities.

Equities and oil markets also gained and the U.S. dollar climbed as investors assessed the new trade deal, dubbed the U.S.-Mexico-Canada Agreement (USMCA).

"The markets probably expected they would come together and come to agree. So I'm not sure it is a big surprise. But it's favourable news," said Rich Feltes, vice president for research with R.J. O'Brien.

Chicago Board of Trade December corn rose 9-1/2 cents, or 2.7 percent, to $3.65-3/4 a bushel by 12:25 p.m. CDT (1725 GMT) in the contract's sharpest gain in six months.

CBOT November soybeans rallied 16 cents, or 1.9 percent, to $8.61-1/2 a bushel, a 5-1/2 week high.

Wheat futures followed corn and soy higher, although gains were capped by weak export demand. CBOT December wheat rose 5 cents to $5.14 a bushel.

Ample stocks of corn and soybeans and expectations for a massive U.S. harvest remained headwinds for grains.

In its quarterly stocks report on Friday, the USDA said soybean inventories stood at 438.1 million bushels as of Sept. 1, an 11-year high. The corn stockpile totalled 2.140 billion bushels, down 7 percent year on year but above expectations.

Soybean supplies have increased as a trade row between Washington and Beijing has slowed U.S. exports to China, the world's top importer of the oilseed. Last week soybean futures neared a 10-year low on worries over the dispute.

The USDA is due to release weekly crop condition ratings and harvest progress estimates after the close on Monday. Analysts, on average, expect corn and soybean conditions to remain stable amid largely favourable Midwest weather.