Soybeans Drop as Rain Aiding Brazil, Argentina Crops; Corn Little Changed

Soybeans declined, capping the first weekly drop in three weeks, on speculation that rain will improve crop development in Brazil and restore soil moisture in Argentina. Corn was unchanged.

Parts of Brazil, the biggest grower and exporter after the U.S., received as much as 1.9 inches (4.8 centimeters) of rain in the past 24 hours, and more is expected in the next two days, World Weather Inc. said in a report today. In Argentina, the third-biggest exporter, 70 percent of the fields will get 0.6 inch to 3 inches of precipitation over the next three days, reducing crop stress, the private forecaster said.

“Rain this weekend will be very timely,” said Don Roose, the president of U.S. Commodities Inc. in West Des Moines, Iowa. “There is little incentive to hold long positions without a threat to South American crops.”

Soybeans for January delivery fell 8.5 cents, or 0.7 percent, to close at $12.73 a bushel at 1:15 p.m. on the Chicago Board of Trade. The most-active futures fell 2.1 percent this week, after gaining 8.2 percent the prior two weeks. Soybeans touched $13.485 on Nov. 12, the highest since August 2009, as Chinese demand surged on concerns that dry weather would hurt South American crops.

Corn Erases Losses

Corn prices erased losses in Chicago today to close unchanged on speculation that Congress will pass a bill next week that extends tax credits for blending grain-based ethanol with gasoline, said Mark Schultz, the chief analyst for Northstar Commodity Investment Co. in Minneapolis.

Corn futures for March delivery closed at $5.7425 a bushel in Chicago, after dropping as much as 1.2 percent. For the week, futures advanced 0.1 percent, a third straight gain.

The USDA left unchanged its estimate of corn used to make ethanol in a monthly report today, even after U.S. production of the fuel additive jumped 6.1 percent last week to a record 939,000 barrels a day, Schultz said.

Corn demand for ethanol will total 4.8 billion bushels, up from 4.568 billion last year, the government said.

“We think demand for ethanol could rise to 5 billion bushels this year,” Schultz said.

A 45-cent-per-gallon tax credit for ethanol production, due to expire at year’s end, would be extended for 12 months in a Senate tax cut plan crafted by the White House and Republicans yesterday.

Gasoline is trading at 17 cents a gallon above ethanol, making it more appealing to use the biofuel, said Sal Gilbertie, the president of Teucrium Trading LLC, which in June launched an exchange-traded product that invests only in corn futures.

“Extending the tax credits won’t make a difference in ethanol demand,” because the fuel still sells at a discount to gasoline, Gilbertie said. “Demand is going to go up.”

Corn is the biggest U.S. crop, valued at $48.6 billion in 2009, followed by soybeans at $31.8 billion, government data show.

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

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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