GRAINS-Soybeans hit nine-month high on biofuel and trade hopes

By Ella Cao and Gus Trompiz

BEIJING/PARIS, May 14 (Reuters) - Chicago soybean futures extended gains on Wednesday to a nine-month high as a proposal to extend a U.S. biofuel tax credit and a truce in a U.S.-China trade dispute boosted hopes that this will be positive for demand.

Chicago wheat and corn ticked lower to hold near lows set this week, with favourable harvest prospects outweighing weakness in the dollar and strong recent demand for U.S. corn.

The most-active CBOT soybean contract Sv1 was up 0.3% at $10.75-1/2 per bushel by 1031 GMT. The contract earlier touched its highest since late July last year at $10.82 as it rose for a fifth consecutive session.

U.S. House lawmakers unveiled a proposal on Monday to extend the clean fuel tax credit (45Z) until December 31, 2031, which could sustain demand for soyoil as a feedstock for the expanding U.S. renewable diesel industry.

Andrew Whitelaw, an agricultural consultant at Episode 3, said that this extension would avert a potential "demand cliff" following the 2027 expiration of the current tax credit.

The outlook for trade was boosted after U.S. President Donald Trump said in an interview on Tuesday that he could envision direct talks with Chinese President Xi Jinping to finalise a U.S.-China trade deal, following a temporary tariff pause between the two countries announced on Monday.

But analysts said there was still a lot of uncertainty ahead of the next U.S. marketing season.

"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.

U.S. soybean exports may drop 20% and the prices paid to farmers will plunge if the United States and China fail to resolve their trade dispute, agribusiness consultants AgResource said on Wednesday.

CBOT wheat futures Wv1 edged down 0.3% to $5.15-3/4 per bushel to remain near its lowest since 2020, after a higher than expected forecast of U.S. stocks and a sharp improvement in U.S. crop conditions reinforced supply pressure this week.

CBOT corn Cv1 was down 0.2% at $4.41-1/2 per bushel, still close to a 2025 low of $4.36-1/2 touched on Tuesday.

The corn market was capped by brisk U.S. planting and favourable harvest prospects in Brazil, which have offset lower than expected U.S. government forecasts of corn stocks.