GRAINS-Corn, soy edge lower; wheat gains ahead of USDA

Trade the News

Friday December 10, 2010 04:27:13 PM GMT

* USDA report seen showing lower grains stocks

* Wheat aided by Australia, U.S. weather woes

* Corn may bounce back to $5.85/bushel-technicals

* Coming Up: U.S. weekly initial claims; 1330 GMT

(Updates prices, adds analyst, France)

By Manolo Serapio Jr. and Martin Roberts

SINGAPORE/MADRID, Dec 9 (Reuters) - U.S. corn and soybean futures retreated on Thursday as investors harvested recent gains ahead of a key U.S. crop report expected to show global supplies are shrinking and stoking demand for U.S. grains.

Analysts polled by Reuters forecast the U.S. Department of Agriculture on Friday will report a 15-year low in U.S. corn supply for the 2010-11 marketing year due to brisk exports and demand for ethanol use. Chinese demand should also cut U.S. inventories for soybeans.

Chicago Board of Trade corn for March delivery slipped 0.48 percent to $5.71-3/4 a bushel by 1249 GMT.

Despite the drop, technical charts suggest Chicago corn may rebound to $5.85 over the next 24 hours, said Reuters market analyst Wang Tao, a level last seen on Nov. 11.

Corn jumped more than 2 percent on Wednesday on supply worries and the possible extension of a U.S. ethanol subsidy programme due to expire by year end.

An extension of the U.S. ethanol subsidy "is part of the deal at the moment" in negotiations for an omnibus tax bill, but the size and life span of the subsidy are not set yet, a trade group said on Wednesday.

CBOT January soybeans meanwhile eased 0.15 percent to $12.94 a bushel, while March wheat rose 0.67 percent to $7.89-1/4.

Wheat scaled four-month highs earlier this week amid concerns heavy rains hitting the Australian crop would cut the global supply of high-quality produce.

"This means that, after Russia and Canada, a third major wheat exporter would also suffer substantial crop losses this crop year. This increases the dependence on the remaining suppliers, especially the European Union and the U.S.," a research report from Commerzbank said.

Analysts are also worried about dry conditions threatening winter wheat production in the United States.

Drought conditions are plaguing the entire western third of Kansas, which routinely is the top U.S. wheat-growing state, according to the U.S. Drought Monitor, a synthesis of indices representing a consensus of federal and academic scientists.

"This could mean crop losses in the U.S. in the coming year, which means that stocks would shrink further there too. Wheat prices should remain well supported as a result," Commerzbank added.

Wheat meanwhile continued to climb in France, Europe's biggest wheat exporter, amid hopes a weaker euro currency and the U.S. rally would make Egypt choose French wheat in its latest tender.

January milling wheat was up 2.50 euros or 1.05 percent at 240.75 euros ($320.1) a tonne in Paris by 1259 GMT, just short of a contract high of 242.50 euros set on Tuesday.

Grains prices at 1302 GMT Product Last Change Percent Move End 2009 Ytd Percent Paris wheat 214.00 1.25 +0.59 131.25 63.05 London wheat 188.50 1.60 +0.86 106.50 77.00 Paris maize 206.50 3.00 +1.47 135.00 52.96 Paris rapeseed 417.00 6.50 +1.58 287.50 45.04 CBOT wheat 787.50 3.50 +0.45 541.50 45.43 CBOT corn 570.25 -4.25 -0.74 414.50 37.58 CBOT soybeans 1293.00 -3.00 -0.23 1039.75 24.36 CBOT rice 13.93 -0.03 -0.18 14.57 -4.39 Crude oil 88.38 7.94 +9.87 79.36 11.37 Euro/dlr 1.32 -0.07 -4.87 1.43 -7.70 *Front month contracts. CBOT contracts in cents per bushel except rice which is in dollars per hundredweight. Paris wheat in euros a tonne and London wheat in pounds per tonne.

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