June 29 (Bloomberg) -- Soybean futures in Tokyo fell as much as 3.1 percent, the biggest fluctuation of any commodity today, on expectations improving crop conditions in the Midwest will boost supply in the U.S., source of two-thirds of Japan's soybeans.

As much as 60 percent of the eastern Midwest will receive as much as 1 inch of rain in the next three days, and temperatures will drop to more-normal levels this weekend, Meteorlogix LLC said yesterday. Declining prices in Tokyo follow a 10 percent slide in futures prices in the past two days on the Chicago Board of Trade.

``People are selling on speculation of the rain,'' said Chen Chaur-Shi, an analyst at commodity futures brokerage Nihon Unicom Corp. in Tokyo. ``Prices will plunge further if the rain comes.''

Soybeans for delivery in June 2006 ended trading down 1,200 yen at 37,330 yen ($339) a metric ton on the Tokyo Grain Exchange, the maximum daily fall allowed by the exchange. The futures fell for the third-straight day, and are down 5.8 percent so far this week.

Japan is the fourth-biggest buyer of U.S. soybeans, trailing China, the European Union and Mexico, according to the U.S. Department of Agriculture. The oilseed is crushed to make cooking oil and livestock feed.

Temperatures will warm again July 4 across the Midwest with rainfall expected to be below normal in the dry areas of the eastern Midwest, Meteorlogix, a private forecaster, said.

Soybeans for delivery in November traded up 7 cents, or 1 percent, at $6.93 a bushel in after-hours, electronic trading on the Chicago exchange at 3:34 p.m. Tokyo time.

Japanese Buying

Japan is expected to buy 3.5 million tons of soybeans from the U.S. in the year ending Sept. 30, the department's Foreign Agricultural Service said last month in a report. Purchases that size would account for about 67 percent of the country's total soybean supply.

Before this week, soybean prices in Chicago had risen 53 percent from a 31-month low of $4.985 on Feb. 4. Drought in February and March reduced crops in South America, and U.S. crops were threatened by as little as 25 percent of normal rains from March to May from Arkansas to Indiana.

The futures' 14-day relative strength index rose to 79.57 on June 20, the highest in more than three months. The index is a gauge of momentum in a given period, and a level above 70 or below 30 signals a change in direction.

The futures tumbled 8 percent in four days after the relative strength index reached the previous high of 79.85 on March 15. The index was at 38.51 yesterday.

To contact the reporter on this story: Jason Gale in Singapore j.gale@bloomberg.net; Fumishige Asano in Tokyo at fasano@bloomberg.net;

Last Updated: June 29, 2005 04:12 EDT