GRAINS-Soybeans hit 9-month high on biofuel tax credit proposal, trade optimism

By Ella Cao and Lewis Jackson

BEIJING, May 14 (Reuters) - Chicago soybean futures rose to a nine-month high on Wednesday, supported by a proposal to extend the biofuel tax credit - boosting demand for U.S. soybeans - and renewed optimism from a temporary truce in the U.S.-China trade dispute.

Trade developments pushed the most-active CBOT soybean contract Sv1 up $10.81 per bushel, marking a nearly 0.8% increase by 0442 GMT. The contract touched its highest point since July 26, 2024, and extended gains for the fifth consecutive session.

U.S. House lawmakers unveiled a proposal on Monday to extend the clean fuel tax credit (45Z) until December 31, 2031.

Andrew Whitelaw, an agricultural consultant at Episode 3, said that this extension would provide certainty for biofuel production, boosting demand for U.S. soybeans.

He said that the potential "demand cliff" following the 2027 expiration of the tax credit could significantly pressure crush margins and lead to weaker soybean prices.

Additionally, optimism was fuelled after U.S. President Donald Trump said in an interview on Tuesday that he could envision direct talks with Chinese President Xi Jinping to finalize a U.S.-China trade deal, following a temporary tariff pause between the two countries in Switzerland.

Analysts, however, cautioned that uncertainty persists as the U.S. marketing season draws near.

"In most crop categories, the new crop won't come in until the fall season. So there's still a great deal of uncertainty about what will happen when the 90-day pause wraps up in August," said Even Rogers Pay, agriculture analyst, Trivium China.

Producers also warned that the tariff pause alone will not help U.S. farmers revive soy sales in China without additional concessions.

Meanwhile, wheat futures Wv1 dipped 0.1% to $5.17 per bushel, hovering near contract lows due to high U.S. inventories, signalling a better-than-expected supply situation.

The USDA projected both U.S. and global wheat-ending stocks for the 2025-26 season above analysts' expectations.

Corn Cv1 was flat at $4.43 per bushel.

U.S. farmers had planted 62% of the nation's corn crop by Sunday, higher than analysts' expectations and ahead of the five-year average for this time of year of 56%, the USDA report showed.