GRAINS-Soybean futures hit three-month high on China and biofuel demand hopes

By Tom Polansek

CHICAGO, Feb 25 (Reuters) - Chicago Board of Trade soybean futures set a three-month high on Wednesday, buoyed by optimism over demand for U.S. biofuel production and exports to China, analysts said.

Wheat futures extended a pullback from an eight-month high on Monday, while corn futures edged higher.

The U.S. Environmental Protection Agency said it will send its proposal for new biofuel blending volume mandates to the White House on Wednesday, with an expected rule to be finalized by the end of March. Biofuel blending requirements are a primary driver of demand for soybean oil.

"It should be lightly supportive," said Rich Nelson, chief strategist for Allendale.

Most-active soybean futures Sv1 were up 7-1/4 cents at $11.62-1/2 a bushel around 12:30 p.m. CST (1830 GMT). The market earlier reached its highest level since November 18 at $11.65-1/2 a bushel, surpassing a previous three-month peak from Monday.

CBOT soyoil futures set contract highs before turning lower.

TRADERS WATCH FOR CHINESE BUYING

Rumors of Chinese interest in U.S. soybean shipments from the Pacific Northwest contributed to price strength, CM Navigator analyst Donatas Jankauskas said.

"China is now back from the Lunar New Year holidays and traders are looking for signs of additional U.S. soybean purchases to justify the recent rally," Jankauskas said.

Traders initially expected that President Donald Trump's decision to introduce a global 10% tariff - and his pledge to increase that to 15% - would cool buying interest from China. But Beijing's measured response to Trump's actions and the end of China's holiday break maintained hopes for more demand.

Trump announced the 10% levy after his tariffs put in place in 2025 under an emergency economic statute were struck down by the U.S. Supreme Court on Friday.

China will decide "in due course" whether to adjust its countermeasures to U.S. tariffs, a commerce ministry official said on Tuesday.

"The market is expecting China to buy U.S. soybeans, which is supporting prices," said one oilseed trader in Singapore. "But we have to wait and see what will be the implication of the U.S. Supreme Court order."

In the wheat market, hopes for rains in dry areas of the U.S. Plains weighed on prices, analysts said.

CBOT wheat Wv1 was down 4-1/4 cents at $5.69 a bushel, while corn Cv1 rose 2-1/2 cents to $4.41 a bushel.