Soybeans, Corn Rise as China’s Stimulus Plan to Boost Demand

March 4 (Bloomberg) -- Soybeans rose the most in more than three weeks and corn gained on speculation that demand for food and livestock feed will improve as China boosts government spending in a bid to spur economic growth.

Premier Wen Jiabao will announce a new stimulus package tomorrow, said Li Deshui, a former central bank policy maker. China’s manufacturing index rose for a third month in February, adding to evidence that spending is reviving growth. The country is the world’s biggest consumer of grain and oilseeds.

“China’s economy looks like it is moving back into an expansion mode,” said Roy Huckabay, an executive vice president for the Linn Group in Chicago. “A controlled economy like China can turn around much faster than a free-market economy.”

Soybean futures for May delivery rose 15 cents, or 1.8 percent, to $8.685 a bushel on the Chicago Board of Trade, the biggest gain for a most-active contract since Feb. 6. The price still is down 47 percent since reaching a record $16.3675 on July 3 and touched an 11-week low of $8.3825 on March 2.

Corn futures for May delivery rose 13 cents, or 3.7 percent, to $3.635 a bushel in Chicago, the biggest gain in a week. Still, the price has tumbled 55 percent from an all-time high of $7.9925 on June 27.

The Reuters/Jefferies CRB Index of 19 commodities rose 3.8 percent, the most this year, led by gains of 9 percent for crude oil and 5.6 percent for copper. The index fell Feb. 24 to the lowest since June 2002.

Sovereign-Fund Buying

China Investment Corp., the $200 billion sovereign wealth fund, may invest in “undervalued” commodity assets, joining other Chinese companies in taking advantage of a six-year low in prices, Executive Vice President Jesse Wang told reporters today in Beijing.

Buying of commodities by state-run funds “could mark the beginning of a change in investment strategy by China, which up until now has parked most of their currency reserves in U.S. Treasuries,” said Jim Gerlach, president of A/C Trading Inc. in Fowler, Indiana. China “appears set to expand their economic influence by buying assets around the world at depressed prices.”

The Baltic Dry Index, a measure of shipping costs for commodities, posted a fourth consecutive advance on the Baltic Exchange, suggesting improved commodity demand, analysts said. The index, after dropping 92 percent last year, has more than doubled since Dec. 24.

“The jump in the shipping index is a sign that China is again restocking natural resources,” Linn’s Huckabay said. “This could be a signal for other countries to start buying, and that means U.S. grain exports may be better than people expect.”

Argentina Farm Dispute

Corn and soybeans also rose as Argentine farmers and the government fight over export taxes and the possible creation of a state-controlled agency to regulate grain trading, Huckabay said. Argentina is the biggest exporter of animal feed and cooking oil made from soybeans and the second-biggest exporter of corn after the U.S.

Argentina’s government yesterday agreed to raise the quota for beef exports, eliminate dairy-export taxes and increase the minimum price at which it will buy wheat. Farmers are scheduled to meet again with the government on March 10 as they seek an agreement on reducing a 35 percent tax on soybean exports and removal of export restrictions on other farm goods.

“The conflict is not over yet,” Eduardo Buzzi, president of the Argentine Agrarian Federation, said yesterday. “We can’t stand this level of taxes with so high costs.”

Last year, the country’s farm groups stopped selling grain and blocked highways during a four-month protest against tax increases and a ban on shipping beef abroad. The move prompted food shortages and higher consumer prices, pushing President Cristina Fernandez de Kirchner’s popularity rating to its lowest ever.

“U.S. soybean meal and soy-oil are competitively priced relative to Argentina and Brazil,” Huckabay said.

Corn is the biggest U.S. crop, valued at $47.4 billion in 2008, following by soybeans at $27.4 billion, government figures show.