US wheat futures slid 0.4 percent on Monday, falling from a 4-1/2 month top, after China raised interest rates on Christmas Day, the latest in a series of measures to cool inflation. But losses in the grain markets were limited by bullish fundamentals of tightening supplies and strong global demand. China's central bank raised interest rates on Saturday for the second time in just over two months as it stepped up its battle to rein in stubbornly high inflation.
"It (the Chinese rate rise) will be bearish for agricultural prices... but we believe the impact will be short-lived and not hit the bullish trend," said Wang Ping, an analyst with Dongwu Futures in China. "The soya market will be supported by the drought in South America and strong US exports. Right now it's also the peak consumption season in China."
Chicago Board of Trade March wheat fell as much as 2.2 percent to a low of $7.66 a bushel in early Asian trade, but recovered to a fall of 0.4 percent at $7.79-1/2 a bushel by 1203 GMT.
Paris wheat futures continued their recent firm trend on Monday, setting new contract highs amid adverse crop conditions in Argentina and Australia which are reinforcing the prospect of tighter global grain supply. Paris' January wheat contract was up 0.25 euros or 0.1 percent at 250 euros a tonne by 1203 GMT after touching a new contract high of 250.50 euros in the morning.
Paris March wheat was up 0.50 euros at 246.75 euros, following a contract high of 247.50 euros earlier in the day. CBOT March corn was down 0.2 percent to $6.13-3/4 a bushel and January soyabeans rose 0.6 percent to $13.58-1/4 a bushel. Soyabean and corn futures have been underpinned by dry weather in Argentina which has threatened to cut supplies from world's second-largest corn exporter and No 3 soya supplier.
Analysts have started trimming their Argentine corn and soyabean production outlooks due to dry conditions. Most of Argentina's corn crop will be pollinating in December, when hot and dry weather can drag down yields. Dry weather will also further delay soyabean sowing in some areas and may put recently seeded crops at risk. The Buenos Aires Grains Exchange lowered its forecast for Argentine soyabean area on Thursday to 18.5 million hectares, down about 1 percent.
The soyabean market received additional support last week from strong demand inside the United States. The US Census Bureau said on Thursday the November soyabean crush totalled 154.99 million bushels, above trade estimates for 154.5 million. Excessive rains in Australia this year have damaged wheat quality, while dry weather in the United States could potentially hurt the winter wheat crop. Wheat climbed 3.5 percent last week and is up around 20 percent this month amid prospects of a global supply squeeze next year.