Nov. 28 (Bloomberg) -- Corn and soybeans rose, erasing earlier losses, on speculation U.S. lawmakers will expand mandates for use of renewable fuels made from crops.

The plan, crafted in the House of Representatives, calls for 20.5 billion gallons of corn-based ethanol by 2015, up from an existing mandate of 7.5 billion, according to a Nov. 21 draft supplied by the industry-funded National Petrochemical and Refiners Association. The bill also would boost the mandate for fuels made from oilseeds.

``A move in Washington to expand renewable fuels mandates would improve ethanol demand and boost corn usage,'' said Jerry Gidel, a market analyst for North American Risk Management Services Inc. in Chicago. ``The political climate for biofuels is improving.''

Corn futures for March delivery rose 3.75 cents, or 0.9 percent, to $4.045 a bushel on the Chicago Board of Trade, after earlier falling 0.9 percent to a one-week low. Two days ago, the price reached a five-month high of $4.11. Most-active futures have risen 9.7 percent in the past year and reached a 10-year high of $4.5025 on Feb. 26 on record demand for corn to produce ethanol.

Soybean futures for January delivery rose 5.75 cents, or 0.5 percent, to $10.9675 a bushel in Chicago, after earlier falling to a one-week low of $10.805. The price rose Nov. 26 to $11.14, the highest for a most-active contract since July 1973. Soybeans have gained 60 percent in the past year after U.S. farmers planted the fewest acres in 12 years to sow more corn.

Energy Legislation

The energy legislation being crafted by House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid is intended to address the causes of climate change and to help reduce the use of oil, which reached a record high of $99.29 a barrel last week.

Under the House plan, 9.5 billion gallons of alternative fuel would be required by 2008 and 11.6 billion would be mandated by 2009. In 2006, almost 5 billion gallons were produced, according to the Energy Information Administration, the Energy Department's statistical arm.

There are 134 ethanol distilleries in the U.S., with the capacity to produce 7.23 billion gallons of the fuel annually, according to the Renewable Fuels Association in Washington. The 77 plants under construction will boost the nation's production capability to about 13.45 billion gallons.

A Senate version of the renewable-fuels standard, passed in June, would require the production of 36 billion gallons of renewable fuels by 2022.

``Congress is now moving forward with historic energy legislation that will reduce our dependence on foreign fuels and promote energy efficiency,'' Pelosi, a California Democrat, said in a Nov. 26 statement. ``We have made significant progress toward completing this package and hope to have a final agreement next week.''

Rising Demand

U.S. demand for corn to produce ethanol is forecast at 3.2 billion bushels in the marketing year that began Sept. 1, down from 3.4 billion estimated earlier this year, the U.S. Department of Agriculture said Nov. 9. Demand for corn used to produce the biofuel rose 32 percent to 2.1 billion bushels last year.

U.S. farmers just finished harvesting a record crop of 13.2 billion bushels, up 25 percent from last year, the USDA estimates.

``Ethanol demand could be a lot better than what the USDA is forecasting,'' said Ron Mortensen, president of Advantage Ag Strategies Ltd. in Fort Dodge, Iowa. ``I have forecast 3.4 billion bushels.''

Compete With Wheat

Corn and soybeans also rose on speculation farmers will opt in April to plant more wheat, which surged to a seven-week high today in Chicago after rising the maximum allowed by the exchange.

Wheat prices have gained 81 percent in the past year as world consumption is forecast to exceed production for the seventh time in eight years, reducing global inventories before next year's harvest to the lowest in 30 years, the USDA estimates.

``At the current prices, corn and soybeans look a little cheap compared with wheat,'' Gidel said.

Corn is the biggest U.S. crop, valued at a record $33.8 billion in 2006, with soybeans in second place, at $19.7 billion, government figures show. Wheat is the fourth-largest crop, behind hay.

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

Last Updated: November 28, 2007 15:58 EST