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Soy Oil Surge Lifts Soybean Prices, Grains Drop

CHICAGO--Soybean futures shot higher Monday, lifted by strong demand for the U.S. crop and rising world prices for vegetable oils, including soy oil.

Soybean prices rose to a six-week high, bolstered by a continued upswing in prices for soybean oil, a vegetable oil used in cooking and fuel. Prices for the oil jumped 2.5% to a more than two-year high as prices for rival palm oil also rallied, spurred higher by tight supplies and robust demand for that ingredient.

Still, analysts warned that soybean prices could quickly go lower if the rally in soybean oil comes to a halt.

"For soybeans to continue to rally without the help of soybean oil we would need to see both the continued strong export demand for U.S. soybeans combined with some kind of South American weather-risk story for a sizeable production area," said Craig Turner, senior broker at Daniels Trading in Chicago in a note to clients.

Soybean futures for November gained 9 cents, or 0.9%, to $9.92 a bushel at the Chicago Board of Trade, the highest closing price since Sept. 9.

Meanwhile, grain prices fell as investor short-covering in corn and wheat markets dried up and traders refocused on massive supplies of the crops at home and abroad. Prices for corn and wheat had rallied recently to multimonth highs as speculative investors like hedge funds and others bailed out of bets on falling prices, lifting the markets. On Friday, however, federal data showed large investors had jettisoned more bearish bets on the crops than anticipated, after which the moves by investors petered out.

Traders on Monday also retrained their attention on massive U.S. corn and wheat harvests this year, record world supplies of the crops, and forecasts for domestic inventories to swell to nearly 30-year highs in 2017. Amid ample stockpiles, prices for the two grains also came under pressure as the two compete for use in animal-feed rations.

CBOT December corn fell 4 1/4 cents, or 1.2%, to $3.48 1/4 a bushel. CBOT December wheat sank 12 cents, or 2.9%, to $ 4.02 1/2 a bushel.

Write to Jesse Newman at jesse.newman@wsj.com

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