Corn Rallies as Recent Declines Seen Overdone, Crude Oil Jumps

By Jae Hur

July 11 (Bloomberg) -- Corn rose for the first time in six days on speculation that losses were overdone and as an increase in energy costs may boost demand for biofuel made from the grain.

The price of corn, used to feed livestock and produce grain- based ethanol, fell 9.4 percent this week before today, heading for a second weekly decline, on favorable crop weather in the U.S. Midwest. The Department of Agriculture will update its supply and demand estimates today. Oil rose more than $5 a barrel yesterday.

``It's a simple technical correction for corn,'' Kazuhiko Saito, strategist at Interes Capital Management Co. in Tokyo, said today by phone. ``In today's USDA report we may see bearish data for corn, and bullish data for soybeans.''

Corn for December delivery added 1.25 cents, or 0.2 percent, to $7.055 a bushel as of 11:51 a.m. in Singapore after trading as high as $7.1075 in after-hours trading on the Chicago Board of Trade and traded at $7.08. The contract declined 1.2 percent yesterday after touching $7.01, the lowest since June 12.

Corn prices have almost doubled in the past year, reaching a record $7.9925 on June 27, as global reserves were forecast to fall to a 24-year low before the start of the U.S. harvest later this year.

The grain market also gained after crude oil gained 4.1 percent yesterday, the biggest one-day increase since June 6, boosting demand prospects for biofuel.

USDA Report

The U.S. Department of Agriculture today may increase its estimate of corn reserves on Aug. 31 to 1.52 billion bushels, up 6.1 percent from a June forecast, according to the average estimate of 14 analysts in a Bloomberg survey. That would be up 17 percent from a year ago. Supplies before the 2009 harvest will total 839 million bushels, 25 percent larger than the previous estimate, the analysts said.

The USDA will peg the surplus before the 2009 harvest at 141 million bushels, below a forecast of 175 million in June, said the analysts. Stockpiles will fall 78 percent to 125 million this year from a record 574 million last year, the USDA said in June.

Soybeans for November delivery fell 1 cent, or 0.1 percent, to $15.86 a bushel as of 11:54 a.m. Singapore time. The contract yesterday rose 1.9 percent on speculation that the USDA report will show falling U.S. inventories after flooding last month reduced acreage.

Most-active futures have risen 78 percent in the past year, reaching a record $16.3675 on July 3.

The oilseed market was also supported by the possibility that farmers in Argentina will resume a strike to protest against grain export taxes proposed by the government.

Argentina Farmers

Farmers plan to resume roadblocks they have manned for the past four months, which have disrupted Argentine grains exports and emptied supermarket shelves in Buenos Aires this year. Protesters will march to Buenos Aires on July 16, when the Senate is set to vote on the new tax, farm group leader Eduardo Buzzi told reporters on July 9.

Wheat for September delivery gained 0.5 cent to $8.185 a bushel as of 11:42 a.m. Singapore time after losing 0.9 percent yesterday on speculation the USDA will raise its output estimate as favorable weather improves prospects for the winter crop now being harvested.

The USDA today will project a total wheat crop of 2.476 billion bushels, up 0.2 percent from a June forecast, according to the average estimate of 11 analysts surveyed by Bloomberg News. Dry weather is helping farmers collect what may be the biggest winter crop since 1998.

The most active contract declined 39 percent from a record $13.495 set on Feb. 27 as world farmers planted more to take advantage of higher prices.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net