US corn and wheat futures rose on Tuesday, recovering from declines in the last session, buoyed by crude oil prices that strengthened as a result of the unrest in Libya. Soyabeans rose after sliding 2.6 percent on Friday, but improved outlook for the drought-hit Argentine crop pressured the oilseed market amid slow demand from China, the world's top importer.
"Pretty much all commodities, including grains, are up this morning and oil is certainly the leader," said Brett Cooper, senior manager for markets at FCStone Australia. "Friday's selloff was largely fund driven in grains and we didn't have much of that follow through selling today, so fundamentally not a lot of change from last week." Chicago Board of Trade wheat for March delivery rose 0.4 percent to $8.25-1/2 a bushel by 0326 GMT. March soyabeans were up 0.4 percent at $13.73 a bushel and March corn up 0.3 percent to $7.11-3/4 a bushel.
Corn rose more than 2 percent in early trade, but gave up some of the gains as a broad sell-off in industrial metals after a sharp fall in China's stock market unnerved investors. China's benchmark stock market index fell more than two percent. Brent crude futures rose more than $1 on concern that violence in Libya could cut more of the Opec-member's output and that a similar story could play out in other top oil producers in North Africa and the Middle East.
Crude oil often directs the movement in corn and soyabean markets for their use in making alternative fuels, which compete with petroleum products. On the fundamental side, there was additional demand for wheat as nervous buyers in Africa and the Middle East, worried about unrest and food inflation, continued to stockpile grains. Morocco's state-run grains agency ONICL has issued a tender for supply of 280,000 tonnes of milling wheat for local mills as part of a subsidised flour programme.
Iraq issued a tender to buy 100,000 tonnes of wheat from any origin, according to spokesman for the Iraq Grain Board said. In addition, South Korea is looking to build a strategic grain reserve and is planning to buy cargoes of corn and another staples, joining similar efforts by other Asian nations. The reserve would be for grains other than rice, such as wheat and corn, and total about 12 percent of annual consumption.
Still, there was some bearish news from China as the nation's drought-hit wheat areas further declined as of Sunday, as wheat areas accessible to irrigation expanded, the Ministry of Agriculture said. Drought-hit areas in eight major wheat producing provinces declined to 6.1 million hectares while the severely hit areas fell to 1.12 million hectares.
The soyabean market remained under pressure as better-than-expected crop outlook in Argentina and slow demand from China weighed on the market. The Argentine government is more upbeat about the country's soya output following recent rains, and sees 2010/11 soya output at above 50 million tonnes, Agriculture Deputy Secretary Oscar Solis said on Friday.
China's soya imports in March and April are seen below a year ago despite a forecast of the slowest pace in nearly a year in February when crushers shut for the Lunar New Year as high global prices hit demand. Chinese authorities have reportedly rejected a proposal to cut soya and soyaoil import tariffs, according to a local media report. The China Business News cited one industry source as saying that the proposed reduction had been rejected by authorities in charge of the matter, although the paper did not identify any of them. Large speculators cut their net long stakes in Chicago Board of Trade soyabean, wheat and corn futures, data from the Commodity Futures Trading Commission showed on Friday.