Corn, Soybeans Rise After China Cuts Rates to Boost Economy

By Jeff Wilson

Nov. 26 (Bloomberg) -- Corn and soybeans rose after China, the world’s biggest oilseed importer and pork producer, slashed interest rates to spur its economy, reviving prospects for an increase in demand for livestock feed and vegetable oil.

Most commodities rose after the People’s Bank of China lowered its one-year lending rate by the most in 11 years. The European Union proposed a 200 billion-euro ($259 billion) economic-stimulus plan to revive growth and investment.

“There will be more interest-rate cuts to prevent global instability,” said Roy Huckabay, an executive vice president for the Linn Group in Chicago. “Even during recessions, the demand for agricultural products still holds up pretty well.”

Corn futures for December delivery rose 0.5 cent, or 0.1 percent, to $3.54 a bushel on the Chicago Board of Trade. The price has fallen 56 percent from a record $7.9925 in late June, reaching a 13-month low of $3.365 on Nov. 21.

Soybean futures for January delivery gained 3 cents, or 0.3 percent, to $8.86 a bushel. Still, the most-active contract is down 46 percent from the all-time high of $16.3675 on July 3. The price reached a 14-month low at $8.3525 on Nov. 21.

The Reuters/Jefferies CRB Index of 19 raw materials rose as much as 3.3 percent, led by gains of more than 6 percent in energy prices. On Nov. 21, the gauge touched the lowest since April 2003.

Fuel Consumption Rises

Corn and soybean prices also climbed after a government report showed that U.S. fuel use last week climbed 510,000 barrels to 19.5 million barrels a day, which may boost demand for alternative fuels made from crops.

Average U.S. ethanol production in September fell 1 percent to 640,000 barrels from a record in August, an Energy Department report today showed. Still, daily production rose 45 percent from a year earlier and was the second-highest ever.

Corn and soybeans “are trading off the daily movements in the petroleum markets,” said Robert Lekberg, a market analyst for Penson GHCO in Chicago.

Corn is the biggest U.S. crop, valued at a record $52.1 billion in 2007, followed by soybeans at $26.8 billion, government figures show.

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net