GRAINS-Slumping prices rise on US budget hopes, technical bounce

Tue Nov 20, 2012 3:13am IST

* Optimism on budget talks supports broad-based gains
    * Technical buying, demand expectations help drive soybeans higher
    * China temporarily halts regular state soy sales
    * Wheat recovers from four-month low set on Friday

 (Adds closing prices in paragraph 7, fund activity in paragraph 8, crop data in
paragraphs 18-19)
    By Tom Polansek
    CHICAGO, Nov 19 (Reuters) - Slumping U.S. grain futures rose on Monday in a
technical bounce from oversold conditions and as signs of progress to resolve a
U.S. budget crunch lifted a range of commodity and equities markets.
    The Thomson Reuters-Jefferies CRB Index of commodities prices 
rose to its highest level in nearly a month after U.S. lawmakers indicated
compromises were possible in negotiations to avert $600 billion in tax increases
and spending cuts due to start in January - the "fiscal cliff" that threatens to
send the U.S. economy back into recession. 
    "At least for today, everybody's feeling kind of optimistic about budgetary
negotiations in Washington," said Dale Durchholz, analyst for AgriVisor. "It's
one of those risk-on days."
    The grain markets were due for a rebound after soybeans set a five-month low
on Friday, erasing gains from the summer's devastating U.S. drought, and wheat
fell to a four-month low, traders said.
    Soybeans sank last week on an improved outlook for global supplies and on
Monday were trading down 22 percent from an all-time high of $17.94-3/4 a bushel
 reached on September 4 as concerns about the drought peaked.
    "Soybeans are oversold and due for a technical bounce," said Brian Hoops,
president of Midwest Market Solutions.
    January soybeans advanced 0.8 percent to $13.94-3/4 a bushel at the
Chicago Board of Trade. December wheat added 0.5 percent to trade at
$8.41-3/4 a bushel, while December corn jumped 1.6 percent to $7.38-3/4 a
bushel.
    Commodity funds bought an estimated 11,000 corn contracts, 4,000 soybean
contracts and 1,000 wheat contracts, CBOT floor traders said.
        
    EYES ON DEMAND
    Soy prices felt additional support from a temporary halt to regular state
soy sales in China, which traders expect will lead to increased U.S. sales to
the world's top soy importer.
    Beijing is starting a stockpiling program for soybeans to improve margins
for soy plants and spur imports, according to the China National Grain and Oils
Information Center (CNGOIC), an official think tank. 
    "Their buyers and their crushers are going to be sourcing more beans out of
the world market, A.K.A. the U.S., rather than sourcing beans out of the Chinese
market," Durchholz said.
    Word that Chinese buyers had canceled deals for at least 600,000 tonnes of
U.S. soybeans dragged prices lower on Friday. The CNGOIC said the deals were
scrapped as weak domestic demand and a recent drop in prices made those
purchases unprofitable. 
    However, the decline in prices should spur fresh sales, analysts said.
    "The main thing now is will we start to see a pickup of Chinese imports,"
said Sudakshina Unnikrishnan, an analyst with Barclays Capital.
    The U.S. Department of Agriculture said 62 million bushels of soybeans were
inspected for export last week, topping expectations for 53 million to 59
million. Weekly export inspections were 14.35 million for corn, above
expectations, and 11.1 million for wheat, within expectations. 
    Separately, the USDA said private exporters struck deals to sell 20,000
tonnes of U.S. soybean oil to unknown destinations. 
    Traders also expect to see an improvement in demand for U.S. wheat as
supplies tighten in other exporting countries like Australia and Ukraine.
    
    RECORD-LOW U.S. WHEAT RATINGS
    The U.S. winter wheat crop on Monday scored a record-low condition rating
for this time of year due to dryness in the Great Plains, according to the USDA.
    The department, in a weekly report, dropped its good-to-excellent rating two
percentage points to 34 percent, below expectations and down from 50 percent a
year ago. 
    Analysts said the decline was concerning but noted the crop can bounce back
before harvest next spring if the weather improves.
    "We'll wait to see what the weather's like in February or March," said Mike
Krueger, president of The Money Farm.

 Prices at 3:11 p.m. CST (2111 GMT)      
                              LAST      NET    PCT     YTD
                                        CHG    CHG     CHG
 CBOT corn                  738.75    11.75   1.6%   14.3%
 CBOT soy                  1394.75    11.50   0.8%   16.4%
 CBOT meal                  424.60     0.00   0.0%   37.2%
 CBOT soyoil                 47.89     0.84   1.8%   -8.1%
 CBOT wheat                 841.75     3.75   0.5%   29.0%
 CBOT rice                 1484.50     0.00   0.0%    1.6%
 EU wheat                   270.25     1.00   0.4%   33.5%
 
 US crude                    89.16     2.24   2.6%   -9.8%
 Dow Jones                  12,796      208   1.7%    4.7%
 Gold                      1732.05    18.56   1.1%   10.8%
 Euro/dollar                1.2812   0.0072   0.6%   -1.0%
 Dollar Index              80.8620  -0.3950  -0.5%    0.9%
 Baltic Freight               1054       18   1.7%  -39.4%
 * All grain and oilseed prices for second position. Paris futures prices in
Euros per tonne, London wheat in pounds per tonne and CBOT in cents per bushel.

 (Additional reporting by Ivana Sekularac in Amsterdam and Naveen Thukral in
Singapore; Editing by William Hardy, Alden Bentley and Sofina Mirza-Reid)
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