Corn, Soybeans Rise as Swine-Flu Outbreak May Not Slow Demand

April 29 (Bloomberg) -- Corn and soybeans rose the most this month on speculation that the swine-flu outbreak will be less disruptive to demand for food, animal feed and fuel made from the biggest U.S. crops than initially expected.

Corn and soybeans fell earlier this week as the swine-flu outbreak expanded from Mexico to the U.S. and at least six other nations, threatening an economic recovery. President Barack Obama asked Congress for $1.5 billion to combat the outbreak. The flu is different from seasonal varieties that hospitalize 200,000 Americans a year, with about 36,000 fatalities, according to the Centers for Disease Control.

“People finally woke up and realized that the swine flu will be contained and is not going to be a major disaster for the world economy,” said Jerry Gidel, a market analyst for North American Risk Management Services Inc. in Chicago. “Previous outbreaks of severe acute respiratory syndrome and avian flu proved not to have long-term impacts on the global economy.”

Corn futures for July delivery rose 17.75 cents, or 4.6 percent, to $4.0125 a bushel on the Chicago Board of Trade. The price has dropped 34 percent in the past year.

Soybean futures for July delivery rose 42 cents, or 4.3 percent, to $10.25 a bushel in Chicago. The price fell 4.9 percent in the previous two days on speculation that swine flu would cut demand. The most-active contract touched a three-month high at $10.645 on April 17 on increased buying by China, the biggest hog producer.

Today’s gains for both soybeans and corn were the biggest since March 31.

Economic Slowdown

Corn and soybeans also rose on increased speculative buying tied to perceptions that the worst of the economic slowdown may have passed, increasing demand for commodities.

U.S. stocks rose for the first time in three days as banks advanced after London-based research company Fox-Pitt Kelton Cochran Caronia Waller’s first upgrade of the U.S. industry since 2004.

The Standard & Poor’s 500 Index has rallied 29 percent since March 9 as investors speculated U.S. Treasury Secretary Timothy Geithner’s plan to finance the purchase of as much as $1 trillion in illiquid assets from banks will help to pull the global economy out of a recession.

Crude oil rose as much as 3 percent as the dollar fell against most major currencies, increasing the appeal of commodities an investment to hedge against inflation, said Mike Zuzolo, the president of Risk Management Commodities Inc. in Lafayette, Indiana.

Weaker Dollar

“The weaker dollar helps” increase buying in corn and soybeans, Zuzolo said in an e-mail. “Investors are working more of a bias that economic recovery was on our doorstep.”

Soybean prices accelerated higher after the Buenos Aires Cereals Exchange cut its forecast for Argentina’s harvest to 34 million metric tons, from last week’s forecast of 36.2 million, because of drought. Argentina, the third-largest exporter after the U.S. and Brazil, harvested 46.2 million tons last year.

Brazil’s crop will total 57 million tons, down from 61 million collected last year, the U.S. Department of Agriculture said April 9.

Combined production in Brazil, Argentina, Paraguay and Bolivia will likely fall below 97 million tons, compared with 115.5 million harvested last year, said Chip Flory, editor of the Professional Farmers of America newsletter in Cedar Falls, Iowa.

U.S. soybean export sales to China since Sept. 1 rose 37 percent from a year earlier, USDA data show. U.S. supplies on Aug. 31, before the next harvest, will drop 20 percent from a year earlier to 165 million bushels, the lowest since 2004, the USDA said earlier this month.

“The drop in South American production has increased Chinese demand for U.S. soybeans” Flory said. “The market is trying to find a way to ration tightening U.S. supplies.”

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