Corn, Soybeans Jump as Rate Cuts May Boost Prospect for Demand

By Jae Hur

Oct. 30 (Bloomberg) -- Corn climbed for a fourth day and soybeans extended gains as the dollar fell against the euro after the Federal Reserve cut its target lending rate to the lowest in a half-century, boosting demand prospects for food, feed and fuel.

Corn jumped the daily limit yesterday on the Chicago Board of Trade and soybeans gained the most in 20 years. The U.S. cut its benchmark interest rate yesterday by a half-percentage point to 1 percent. China also lowered rates for the third time in two months to alleviate a credit freeze and boost economic growth.

``The pullback in the U.S. dollar combined with the cut in U.S. and Chinese interest rates is driving the grains higher,'' said Toby Hassall, an analyst at Commodity Warrants Australia.

Corn for December delivery rose as much as 2.9 percent to $4.33 a bushel in electronic trading in Chicago and was at $4.2925 by 2:56 p.m. Singapore time. The price, which gained the 30-cent daily limit yesterday, reached a record $7.9925 June 27. Corn touched $3.64 on Oct. 27, the lowest since Oct. 25, 2007.

``Of course there is a transmission lag from monetary policy to demand so these rate cuts won't instantly improve flagging commodity demand but the cuts have delivered an immediate impact in the form of improving market sentiment,'' Hassall said.

Soybeans for January delivery gained as much as 2.9 percent to $9.74 a bushel and was at $9.69 by 2:57 p.m. Singapore time. The contract gained 6.6 percent yesterday, the most since August 1988. Futures, which reached a record $16.3675 on July 3, fell to $8.38 on Oct. 16, the lowest since August 2007.

Production Forecast

The grain market also advanced after the U.S. Department of Agriculture cut its production forecast from an earlier estimate because of errors in acreage estimates, Shuji Sugata, research manager at Mitsubishi Corp. Futures & Securities Ltd., said.

The U.S. corn harvest will be 12.033 billion bushels, 1.4 percent less than estimated on Oct. 10, the USDA said Oct. 28. The agency cut its estimate of harvested acres by 1.3 percent and said inventories on Aug. 31 will total 1.088 billion bushels, down 5.7 percent from an earlier forecast of 1.154 billion.

The soybean harvest will be 2.938 billion bushels, down 1.5 percent from the Oct. 10 forecast, the USDA said. Reserve inventories before next year's harvest were projected at 205 million bushels, down from 220 million bushels estimated earlier this month.

Dollar Declines

The dollar fell as low as $1.3292 per euro, the lowest since Oct. 21 and the MSCI Asia Pacific Index added as much as 9 percent to 87.99. Crude oil is set for its biggest two-day gain in five weeks. Oil for December delivery rose as much as 4.6 percent to $70.60 a barrel after gaining 7.6 percent yesterday.

Wheat for December delivery added as much as 3.1 percent to $5.785 a bushel and was at $5.7275 by 2:57 p.m. Singapore time. The contract gained 9.2 percent yesterday, the biggest percentage gain for the contract closest to expiration since June 30, 1988. Wheat touched a record $13.495 on Feb. 27.

Japan is seeking to buy 96,000 tons of milling wheat at a tender tomorrow.

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