Wheat, Soybeans Gain as Demand for U.S. Grains May Increase

Dec. 23 (Bloomberg) -- Wheat and soybeans advanced on expectations of increased demand for U.S. exports as supplies of high-quality grain may tighten and China, the world s biggest food consumer, may increase imports.

China will expand import channels of grain and cotton and boost government reserves of food staples including meat and sugar, Minister of Commerce Chen Deming said yesterday. U.S. exporters sold 116,000 metric tons of corn to unknown buyers and 110,000 tons of soybeans to China for delivery in the 2010-2011 marketing year, according to the U.S. Department of Agriculture. China has been selling government reserves to boost local supplies and hold down prices.

"It's healthy follow-through gains," Ker Chung Yang, an investment analyst at Phillip Futures Pte., said by phone from Singapore. "Wheat is likely to trade higher around December to January than the rest of the year due to tightening of supplies."

Milling-quality wheat production in New South Wales, Victoria and South Australia this season is expected to be half of the total output following heavy rains, Australia & New Zealand Banking Group Ltd. said in a report. From June 1 to Dec. 9, U.S. sales of the hard-red winter variety, used to make bread and flour, more than doubled from a year earlier, government data show.

Wheat futures for March delivery advanced as much as 0.5 percent to $7.875 a bushel in Chicago, the highest level since Dec. 10, before trading at $7.8675 at 10:31 a.m. in Singapore. Prices have advanced 47 percent this year on drought in Russia and concern that high-quality grain will be in deficit.

Soybeans Rise

March-delivery soybeans gained as much as 0.4 percent to a six-week high of $13.455 a bushel, before trading at $13.4475. Prices have advanced 29 percent this year on record Chinese demand.

Corn futures for March delivery were little changed at $6.0925 a bushel after rising to $6.0975 a bushel yesterday, the highest for the most-active contract since Nov. 9. Prices have climbed 48 percent this year.

The prospects for the world grain harvest next year are "mixed," according to the United Nations' Food and Agriculture Organization. World grain production will decline 1.4 percent in 2010-11 to 2.23 billion metric tons, better than a November forecast for a 2.1 percent drop, the Rome-based agency said in a report on its website yesterday.

"Price developments in the remainder of the 2010-2011 marketing season will depend greatly on prospects for 2011 cereal crops, which are mixed so far," the FAO said. "Any significant deterioration in crop prospects would add new impetus to the price spiral."