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U.S. grains: Corn, soy gain as shorts hunt for cover

Investors brace for Wednesday's USDA grain stocks report

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Chicago | Reuters — Chicago soybean and corn futures rebounded on Tuesday as traders covered short positions on concerns that the U.S. Agriculture Department would reduce its estimate for last year’s soybean crop.

Wheat prices eased back, despite being bolstered earlier in the day by steadying equity and oil prices, and cooling concerns about the pace of China’s economic growth.

But much of the market recovery stemmed from short-covering ahead of Wednesday’s USDA report.

Analysts and investors have been nervous about the extent that USDA may have overstated its estimates for 2014 domestic soybean production.

Analysts expect USDA to trim last year’s soybean crop estimate by up to 60 million bushels, said Richard Feltes, R.J. O’Brien’s vice-president of research. That would mean today’s supplies are tighter than what USDA had previously estimated.

Traders will also be looking for how much corn and wheat was fed, and how much residual crop there will be for soybeans, said Futures International senior commodities analyst Terry Reilly.

“Whatever comes out of that report, that could create fireworks,” Reilly said.

The market tends to react negatively to the quarterly grain stocks report, according to MaxYield Cooperative analyst Karl Setzer.

Citing research from FC Stone, Setzer wrote in a note that in three of the past four years, corn and soybean futures have traded lower following the September stocks report.

Chicago Board of Trade November soybeans closed on Tuesday up 7-1/2 cents, or 0.9 per cent, at $8.84-1/4 a bushel (all figures US$).

December corn closed up 2-1/4 cents, or 0.7 per cent, at $3.89 a bushel, and wheat was down 1-3/4 cents, or 0.4 per cent, at $5.03-3/4 a bushel.

There is pressure on global markets because of concerns about slowing growth in China.

But some European stock markets pared losses, and oil also recovered some ground. A run of soybean purchases by China, which imports 60 per cent of the crop traded worldwide, suggested food demand was holding up.

Global trader Louis Dreyfus Commodities said Tuesday that growth in its first-half volumes showed sustained food demand even as it reported a halving of net profit due to weaker agricultural markets and slowing emerging economies.

P.J. Huffstutter reports on agriculture and ag commodity markets for Reuters from Chicago. Additional reporting for Reuters by Julie Ingwersen in Chicago, Naveen Thukral in Singapore and Gus Trompiz in Paris.

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