Wheat Extends Gains on U.S. Export Demand; Corn, Soybeans Drop

By Jae Hur

Sept. 4 (Bloomberg) -- Wheat climbed for a second day amid speculation the recent price drop to the lowest in about a month will attract overseas buyers. Corn and soybeans declined.

Wheat rallied 1 percent yesterday, ending the longest slide in more than two years. Japan bought 76,000 metric tons of milling wheat today and Bangladesh has been seeking 100,000 tons of wheat for October delivery. Egypt bought 120,000 tons of U.S. wheat yesterday, part of a purchase that included Canadian and Ukrainian grain.

``The price decline to a one-month low earlier this week has encouraged buying interest,'' said Takaki Shigemoto, an analyst at Tokyo-based commodity broker Okachi & Co. Wheat is relatively cheaper than corn for animal feed, he said.

Wheat for December delivery was up 0.4 percent to $7.775 a bushel as of 3:15 p.m. Singapore time in after-hours electronic trading on the Chicago Board of Trade. Prices fell 17 percent in seven sessions to Sept. 2, the longest slide since April 2006.

The futures have fallen 42 percent below the record $13.495 set on Feb. 27 after farmers globally increased acreage to take advantage of a 77 percent price rally in 2007.

The world's growers are expected to harvest a record 670.8 million tons in the year that ends on May 31, up 9.9 percent from the previous year, the U.S. Department of Agriculture said on Aug. 12. Stockpiles may climb 18 percent to 136.2 million tons, the USDA said.

``The U.S. government is expected to revise its output forecast for Australia in the next monthly supply and demand report following drought in August,'' Shigemoto said.

Australian Drought

Dry weather in August in Australia, forecast to be the world's third-largest wheat supplier, had raised concern production may be limited in some areas.

The USDA's projection for wheat harvest in Australia was 25 million tons for 2008-09, up from 13 million tons in the previous year, according to government data issued on Aug. 12.

Corn for December delivery fell 5.25 cents, or 0.9 percent, to $5.57 a bushel as of 3:14 p.m. Singapore time. It lost 1.2 percent yesterday after touching $5.50, the lowest since Aug. 15. The price has fallen 30 percent from a record $7.9925 on June 27.

Soybeans for November delivery declined 9.5 cents, or 0.8 percent, to $12.42 a bushel after declining 3.6 percent yesterday, the most since Aug. 15. Futures have slid 24 percent from a record $16.3675 on July 3.

``More rain is forecast for the Midwest in coming days,'' Toby Hassall, an analyst at Commodity Warrants Australia in Sydney, said by e-mail. ``After last week's deterioration in the condition of the corn and soybean crops, good rains would boost topsoil moisture, which would in turn benefit corn and soybean yield prospects.''

In addition to weather, investors will keep an eye on the direction of the dollar, Hassall said. A weaker dollar often boosts demand for U.S. supplies from overseas buyers holding other currencies.

``I think in the near term we could see the dollar rally take a breather.''

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