Jan. 8 (Bloomberg) -- Corn futures may rebound in Chicago on speculation the government will reduce its estimate of last year's U.S. harvest. Soybeans may gain on rain damage to crops in South America.

Fourteen of 21 traders, farm advisers and grain merchants surveyed Jan. 5 said to buy corn after prices plunged 5.6 percent last week, the most since August. Fifteen respondents said to buy soybeans, which fell 2.3 percent after ending 2006 at a 16-month high.

Farmers probably harvested about 10.709 billion bushels of corn, 0.3 percent less than the U.S. Department of Agriculture's Nov. 9 estimate of 10.745 billion, Informa Economics Inc. said Jan. 5. The amount of corn used as animal feed and to make fuel worldwide has exceeded output in six of the past seven years, sending inventories to the lowest in two decades.

``Corn ends higher on the week in preparation for the USDA report,'' said Tim Hannagan, grain analyst for Alaron Trading Corp. in Chicago. ``Production will come in lower,'' tightening global supplies as demand rises to a record, he said. The USDA is scheduled to release its crop estimates on Jan. 12.

Corn futures for March delivery fell 22 cents last week to $3.6825 a bushel on the Chicago Board of Trade, after climbing for three straight weeks. Prices surged a record 81 percent last year, reaching a 10-year high of $3.935 in November after a Midwest drought reduced U.S. production and demand for grain to make ethanol rose to a record.

Soybean Futures

The March soybean contract fell 15.75 cents to $6.815 a bushel last week. Prices reached a high of $6.9725 on Dec. 29, the last trading day of 2006, jumping 28 percent in the final quarter, the most over a three-month period since October 2003.

Most respondents surveyed Dec. 29 were surprised by last week's losses in corn and soybeans after predicting a continuation of the 2006 rallies. The corn survey has been accurate 55 percent of the time since it began April 26, 2004. The soybean survey, which started six weeks later, has been correct 54 percent of the time.

Corn also may rise on speculation oil prices will soon rebound, spurring demand for grain to make ethanol.

Abdullah bin Hamad al-Attiyah, the Qatari oil minister, said last week the Organization of Petroleum Exporting Countries is ``very concerned'' about falling oil prices and may need to meet before its scheduled March 15 gathering if the decline continues. OPEC started slowing production Nov. 1 to bolster prices.

Oil, which is down 10 percent from a year ago, fell 7.8 percent last week, the biggest decline since April 2005.

Ethanol Demand

``Oil prices could snap back because OPEC is going to cut back production very quickly to maintain revenues,'' said Roy Huckabay, executive vice president for the Linn Group in Chicago. ``Demand for corn to make ethanol may double by 2008.''

U.S. demand for corn used to make ethanol, a gasoline additive, will rise 34 percent to a record 2.15 billion bushels in the marketing year that began Sept. 1, the USDA said Dec. 11. Corn, which is also used to make livestock feed and sweeteners, is the nation's biggest crop, valued at $23 billion last year.

The 110 factories now producing ethanol in the U.S. have boosted their annual capacity by 12 percent in the past six months, to 5.3 billion gallons, according to the Renewable Fuels Association in Washington. An additional 6 billion gallons of capacity will be added in the next two years as 79 new plants or expansions of factories are completed, the association said.

Brazil Soybeans

Soybean prices may rise on concerns that excessive rain the past month will hurt young plants in Brazil, the second-largest grower and exporter of the oilseed after the U.S.

The cyclical warming of equatorial Pacific waters, known as El Nino, may bring as much as three times the normal rainfall to southern Brazil over the next four to six months, said Joselia Pegorim of Climatempo in Sao Paulo. The USDA's monthly vegetation index shows less crop growth than a year ago because of the wet conditions.

The rain may reduce output as it hinders harvesting and washes out chemicals that help prevent losses from disease, pests and weeds, Guilherme Bastos, with crop forecaster Agroconsult, said in an interview. Bastos, who forecast this year's crop at more than 54 million metric tons, said the rains may cut output to 52 million. The USDA forecast a crop of 56 million tons on Dec. 12.

``Too much rain will lead to crop losses,'' as soybeans enter the yield-determining period of pod development later this month, said Don Roose, president of U.S. Commodities Inc. in West Des Moines, Iowa. ``Prices should recover some of the losses,'' until fields begin to dry and production risk recedes, Roose said.

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

Last Updated: January 7, 2007 19:17 EST