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U.S. wheat, soy rally on bargain buying

Bearish USDA stocks data continues to hang over market

Chicago Board of Trade (CBOT) wheat prices rose one per cent Tuesday on bargain buying as the market rebounded from Monday when it fell to a nine-month low in reaction to last week's U.S. government report that showed larger-than-expected grain stockpiles.

Soybeans closed higher, recovering from a three-month low earlier in the day, while nearby corn edged lower after a choppy session. Front-month corn has fallen 95 cents a bushel, or 13 per cent, since the U.S. Department of Agriculture released its quarterly grain stocks report on March 28 (all figures US$).

"We've obviously done significant damage to these markets, and today we had a bit of a bounce back," said Mark Gold, managing partner of Top Third Ag Marketing in Chicago.

At the CBOT, May wheat settled up 6-3/4 cents at $6.70-3/4 a bushel. May soybeans rose 3-1/4 cents to $13.94/bu. while May corn fell 1-3/4 cents to settle at $6.40-1/2 a bushel.

Wheat rallied in the final minutes of the session, due in part to poor crop conditions in the southern U.S. Plains, traders said.

USDA late on Monday said 34 per cent of the U.S. winter wheat was rated in good to excellent condition, the lowest for this time of year since 2002.

"The crop ratings had a little bit to do with it," Gold said. "There still maybe some question about how much damage was done to wheat in last week's frost. I don't think the net effect is going to have a lot to do with this market, but it may be part of the strength here today," he added.

The biggest gains in wheat were in Minneapolis, where MGEX spring wheat futures were supported by a lack of farmer selling and a weekly report showing a drop in the amount of deliverable spring wheat stored in commercial warehouses at the Duluth/Superior terminal.

Market digesting report

While soybeans and corn pared losses late in the day, some traders said both markets could face further liquidation as traders continued to absorb USDA's blockbuster stocks and planting intentions reports, released March 28.

The government pegged U.S. corn stocks as of March 1 at 5.4 billion bushels, well above the average analyst estimate of about five billion. Stocks of soybeans and wheat also came in above expectations, and the USDA said farmers would plant the most acres to corn since 1936.

"The reports on Thursday were a game changer and it's going to take something dramatic to get the bearish mood out of these markets," Gold said.

The drop in CBOT corn prices during Thursday and Monday totaled 12.6 per cent, the biggest two-day decline in data dating back to 1959, an exchange spokesman said. The markets were closed on Good Friday.

"Traders are cautious and uncertain whether the fund liquidation that has been pressing the (corn) market lower is complete," said Shawn McCambridge, grains analyst with Jefferies Bache in Chicago.

"We've nailed this market so hard but could not generate much follow-through buying," McCambridge added.

Slight bounce for soybeans

Bargain buying lifted soybeans after the spot contract fell to $13.86 a bushel, the lowest spot price since Jan. 7.

But November soybeans, representing the 2013 U.S. harvest, closed at $12.48-3/4, settling below $12.50 for the first time since last July, a bearish technical signal.

Prospects for a larger 2013 U.S. soy crop have weighed on new-crop soybean prices. Soybeans have gained value relative to corn, a factor that could prompt U.S. farmers to switch some corn acres over to soybeans when planting begins in the coming weeks.

Also, cold weather in the Midwest has kept farmers from getting an early start with field work. Any major weather delays in April and May could favor soybeans, which can be seeded later than corn.

Nearby CBOT soybeans have been underpinned by transport bottlenecks in Brazil, where delays in moving the country's likely record-large harvest into export channels have steered some global soy export business to the United States.

However, the worst delays are probably over and Brazil's shipments are likely to increase in coming weeks, Hamburg-based oilseed analysts Oil World said.

-- Julie Ingwersen covers the CBOT grain and oilseed markets for Reuters in Chicago. Additional reporting for Reuters by Nigel Hunt in London and Naveen Thukral in Singapore.

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