CHICAGO Soybean futures rebounded on Friday as worries about drought-reduced crops in South America and that early corn seeding in the Midwest may divert planted acres from soybeans lifted prices more than 1 percent.
Corn followed soybeans higher, adding 0.6 percent in a short-covering bounce, although gains were capped by expectations for the most planted acres this year since 1944.
Wheat also drew support from higher soy, with dollar-denominated grains in general lifted by a weaker U.S. currency, which makes them more competitive on the world market.
Traders looked ahead to the prospective plantings report to be released by the Department of Agriculture on March 30 amid a backdrop of unseasonably mild U.S. weather that has some farmers already planting corn.
Early seeding tends to result in more corn acres, some at the expense of soybean area, and higher corn yields as crops would likely pollinate ahead of the hottest summer weather.
The ratio of corn to soybean new-crop prices is increasingly encouraging a shift to more soybean planting in the United States following worse-than-anticipated crop losses in key exporters Brazil and Argentina due to a severe drought.
"If the South American crop's getting smaller then we cannot afford to lose any acres. We may have to attract acres out of corn and into soybeans and I'm not sure the price can go up fast enough to do that because if (farmers) can plant early then they're going to plant corn," said Mark Schultz, chief analyst with Northstar Commodities.
New-crop soybean/corn ratio: link.reuters.com/kek37s
The ratio of November soybeans to December corn climbed to a one-year-high 2.37-to-1 this week, nearing the 2.5-to-1 level that typically triggers more soybean planting.
SHRINKING SOY CROP
Argentina's agriculture ministry on Thursday projected the country's 2011/12 soy harvest at 44 million tonnes, below USDA's latest forecast for 46.5 million.
Earlier this week, oilseeds analyst Oil World cut its estimates for soy crops in Brazil and Argentina by a combined 2 million tonnes.
"In soybeans we're just keep getting an ongoing drumbeat of lower South American production estimates," said Charlie Sernatinger, analyst with ABN Amro.
"The fundamental function of price here is to tell the farmer: 'if you have discretion over surface area, you shouldn't increase corn as much as you intended. Put more beans in the ground because South America fell flat on its face."
Firm cash markets also supported soybeans, with more U.S. old-crop soy sales to China expected amid South America's crop woes. Traders said China bought a cargo of U.S. soybeans on Thursday for April shipment from the Pacific Northwest.
Soybeans also drew support from rallying soyoil prices, which climbed in tandem with global edible oil prices.
Benchmark Malaysian palm oil futures hit nine-month highs on Friday on an upbeat demand outlook and as top palm oil producer Indonesia planned to raise its export tax from April.
Chicago Board of Trade May soybean futures rose 1.2 percent to $13.66 a bushel by 12:59 p.m. EDT, posting the strongest gains in 1-1/2 weeks. But the contract remained on pace for its first weekly decline in six weeks following steep drops earlier in the week.
CORN, WHEAT FIRM
CBOT corn climbed for a second straight session after hitting a 3-1/2-week low on Thursday, but the market remained poised for its steepest weekly drop in two months.
The weaker dollar supported grain prices.
The U.S. currency fell to three-week lows versus the euro and the Swiss franc as traders cited stop-loss sell orders being triggered on the dollar's break of technical support against a basket of currencies. <FRX/>
CBOT May corn added 0.7 percent at $6.48-3/4 per bushel, while CBOT May wheat put on 0.9 percent at $6.52-1/4 a bushel.
Prices at 1:07 p.m. EDT
LAST NET PCT YTD
CHG CHG CHG CBOT corn 647.50 3.00 0.5% 0.2% CBOT soy 1366.00 16.50 1.2% 14.0% CBOT meal 373.40 3.30 0.9% 20.7% CBOT soyoil 54.76 0.80 1.5% 5.1% CBOT wheat 650.50 4.25 0.7% -0.3% CBOT rice 1453.50 13.00 0.9% -0.5% EU wheat 213.00 2.75 1.3% 5.2%
US crude 107.06 1.71 1.6% 8.3% Dow Jones .DJI 13,090 44 0.3% 7.1% Gold 1661.21 16.33 1.0% 6.2% Euro/dollar 1.3264 0.0069 0.5% 2.5% Dollar Index .DXY 79.3510 -0.3850 -0.5% -1.0% Baltic Freight .BADI 908 6 0.7% -47.8%
(Additional reporting by Mayank Bhardwaj in New Delhi, Ivana Sekularac in Amsterdam; Editing by Dale Hudson and Bob Burgdorfer)