GRAINS-Prices tumble after U.S. fiscal deal euphoria fades

Thu Jan 3, 2013 2:14am IST

* Stumbles on lack of follow through during strong open
    * Favorable biodiesel credits lift soyoil
    * Soyoil posts biggest one day advance in over 4 months

 (Updates prices to reflect Wednesday's CBOT close)
    By Sam Nelson
    CHICAGO, Jan 2 (Reuters) - U.S. grains tumbled on Wednesday,
led by a 3-percent slump in wheat prices, as a rebound in the
dollar wiped out early gains fueled by U.S. lawmakers acting to
prevent massive tax increases and spending cuts.
    Soyoil was the only market that held strong throughout the
first trading day of 2013, supported by U.S. lawmakers extending
a tax credit for biodiesel through 2013 at a cost of more than
$2 billion. 
    A firming trend for the dollar after its initial drop added
pressure to grain futures. The dollar index had traded
nearly a half percent lower early on Wednesday but recovered to
trade up 0.15 percent as of 1:00 p.m. CST (1900 GMT).
    The dollar has an inverse price relationship with grains as
any strengthening of the greenback would make U.S. commodities
cost more in foreign currencies, affecting exports from the
world's largest exporter of corn, soybeans and wheat.
    "It was a bit disappointing with the strong start but it was
quickly evident there was no follow through," said Shawn
McCambridge, an analyst for Prudential Commodities.
    "When the outside markets began stalling and the dollar
started recovering, we reverted to the fundamentals of poor
demand for grains."
    In initial dealings, soybeans rose 1 percent, led by a
nearly 3 percent rally in soyoil because the fiscal legislation
included continuation of favorable tax perks for the biodiesel
industry.
    January soyoil leaped to a three-week high after the
lawmakers included a $1 a gallon tax credit for biodiesel that
will run through 2013 at a cost of more than $2 billion.
 
    Soyoil posted the biggest one-day percentage advance in over
four months.
    The credit was one of an eclectic mix of handouts, take
backs and special-interest tax breaks included by Congress in
the last-minute deal to avoid the automatic spending cuts and
tax increases that otherwise would have begun the year.
    The new legislation boosted gold to a two-week peak, drove
crude oil higher and the U.S. stock market rose nearly 2
percent.
   Chicago Board of Trade January soyoil was up 2.77
percent, or 1.36 cents per lb, at 50.52 cents, January soybeans
 were down 13-1/4 cents per bushel at $14.05-1/2.
    CBOT March corn slipped 7-1/2 cents to $6.90-3/4 per
bushel and March wheat was down 23 at $7.55.
    Grain markets had been closed New Year's Day and reopened at
9:30 a.m. CST (1530 GMT) on Wednesday.
    
    MARKETS CHOPPY AFTER ANNUAL GAINS IN 2012
    Wheat posted the biggest gain last year among the 19
commodities in the Thomson Reuters-Jefferies CRB index
, soaring 19.2 percent despite falling for three
straight months and tumbling 7.9 percent in December alone.
    Traders were concerned about unfavorable weather affecting
wheat crops from Australia to Europe throughout the year and the
drought in the U.S. winter wheat growing regions.
    Soybeans were the second-best gainer, up 18.4 percent. Corn
rose 8 percent, notching its fourth straight year of gains
despite ending 2012 with a five-month losing streak.
    Corn and soybeans set record highs last year due to the
drought, despite a rapid planting pace in the spring after an
unseasonably mild winter. 
    Wheat was pressured by poor export demand for U.S. supplies
on Monday and soybeans dropped on favorable crop weather in
South America. On Monday, the markets had found support in thin
New Year's Eve volume on hopes that lawmakers in Washington
found a solution to avert the so-called fiscal cliff.
    Failure to reach a deal could have weakened the global
economy and further roiled demand for U.S. commodities.
    Wheat, corn and soybeans have outperformed the CRB, which
was down 3.3 percent for the year.
   
 Prices at 2:27 p.m. CST (2026 GMT)      
                              LAST      NET    PCT     YTD
                                        CHG    CHG     CHG
 CBOT corn                  690.75    -7.50  -1.1%    6.8%
 CBOT soy                  1405.50   -13.25  -0.9%   17.3%
 CBOT meal                  407.10   -13.50  -3.2%   31.6%
 CBOT soyoil                 50.52     1.36   2.8%   -3.0%
 CBOT wheat                 755.25   -22.75  -2.9%   15.7%
 CBOT rice                 1475.50   -10.50  -0.7%    1.0%
 EU wheat                   251.50     1.25   0.5%   24.2%
 
 US crude                    92.87     1.05   1.1%   -6.0%
 Dow Jones                  13,347      243   1.9%    9.2%
 Gold                      1687.59    13.05   0.8%    7.9%
 Euro/dollar                1.3175  -0.0029  -0.2%    1.8%
 Dollar Index              79.8500   0.0810   0.1%   -0.4%
 Baltic Freight                698       -1  -0.1%  -59.8%
 
       

 (Additional reporting by Mark Weinraub in Chicago and Chuck
Abbott in Washington; Editing by Nick Zieminski)
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