Soybeans Fall After Touching Record on U.S. Production Concern

By Jae Hur

July 3 (Bloomberg) -- Soybeans declined after reaching a record for a third day on concern the worst Midwest flooding in 15 years may pare production and inventories in the U.S., the largest producer and exporter. Corn also fell.

Soybeans gained 15 percent in June, the biggest monthly advance since February, amid concern flood damage to fields may curb output increases the U.S. government predicted after farmers planted more acres this year. U.S. farmers may harvest 96.8 percent of this year's planted acreage, down from 98.7 percent last year, the U.S. Department of Agriculture said June 30.

The oilseed, used for cooking oil and biofuel, advanced 89 percent in the past year, as crude oil, wheat and corn prices also reached records fueling inflation. Gaining prices have spurred riots from Egypt to Haiti, increased costs at Nestle SA and Kraft Foods Inc., the world's largest food companies and boosted profits of grain traders such as Archer Daniels Midland Co. and Cargill Inc.

``It's getting worse with surging inflation,'' said Nicholas Chung, senior manager of the commodity derivatives team at Korea Development Bank in Seoul. ``Soybeans are not the only commodity reaching a record.''

Soybeans for November delivery dropped 28.5 cents, or 1.8 percent, to $16.015 a bushel at 12:23 p.m. Singapore time after reaching a record $16.3675 a bushel in after-hours trading on the Chicago Board of Trade. Soybean's 14-day relative strength index, a gauge of momentum, held above 70 yesterday, signaling prices may decline.

Planting Progress

U.S. farmers intended to sow 74.533 million acres of soybeans, and about 95 percent of the crop was planted on June 29, leaving 3.7 million acres yet to be planted, USDA data show. The USDA said earlier this week that harvested acreage would have been 1.3 million acres larger without the flooding.

Soybeans have been supported by speculation U.S. inventories before the harvest will be smaller than the 125 million bushels the USDA forecast June 10 and a three-month old farmers' strike in Argentina may boost demand for U.S. supplies. U.S. inventories are forecast to fall to just 15 days of use.

Argentina's farmers may resume protests and halt grain sales if Congress passes a law on export taxes as proposed by the government, said Miguel Calvo, vice president of the Argentine Soy Chain Association.

President Cristina Fernandez de Kirchner has asked Congress to pass as law a variable-rate tax increase, imposed in March, that boosted levies on soybeans and sunflower seeds to more than 40 percent from a fixed 35 percent.

Corn Declines

Corn for December delivery fell 9.5 cents, or 1.2 percent, at $7.71 a bushel at 12:23 p.m. Singapore time after gaining 3.8 percent yesterday on speculation that hot, dry weather will threaten U.S. crops that already have smaller root systems than normal after flooding.

Corn futures, which rose to a record $7.9925 on June 27, have more than doubled in the past year as global reserves are forecast to fall to a 24-year low by the end of August.

Wheat for September delivery was down 6.75 cents, or 0.8 percent, at $8.735 a bushel at 12:24 p.m. Singapore time. Prices fell 35 percent from a record $13.495 set on February 27 on speculation that global production will increase.

Wheat prices gained 1.8 percent yesterday on speculation that producers of hog, cattle and poultry will seek the grain as an alternative to high-cost corn, analysts said.

Inflation in Korea will accelerate to the fastest pace in a decade this year, the nation's central bank said in its semi- annual statement on July 1.

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