Syrian aircraft strike Aleppo, rebels claim successes

A Free Syrian Army member stands by his anti-aircraft machine gun during their patrol in Attarib, on the outskirts of Aleppo province July 30, 2012. REUTERS/Zohra Bensemra

ALEPPO, Syria (Reuters) - Syrian combat aircraft and artillery pounded Aleppo late into the night as the army battled for control of the country's biggest city, where rebel fighters said troops loyal to President Bashar al-Assad had been forced to retreat.

During the day on Tuesday large clouds of black smoke rose into the sky after attack helicopters turned their machineguns on eastern districts for the first time in the latest fighting and a MiG warplane later strafed the same area.

After nightfall, Reuters journalists in Aleppo heard loud explosions somewhere near the city. At least 10 volleys of shells lit up the night sky and drowned out the sound of the Islamic call to prayer. Carloads of rebel fighters shouting "God is great" sped off towards the fighting.

The battle for Aleppo, Syria's largest city, has become a crucial test for both sides in the 16-month-old rebellion. Neither Assad's forces nor the rag-tag rebels can afford to lose if they hope to prevail in the wider struggle for Syria.

Syria's civil war has entered a far more violent phase since July 18 when a bomb killed four top members of President Bashar al-Assad's inner circle. Serious fighting reached Aleppo over the past week and rebels also launched an assault on the capital Damascus in July but were repulsed.

Heavy gunfire echoed around the Salaheddine district in the southwest of the city, scene of some of the worst clashes, with shells raining in for most of the day.

Reuters journalists have established that neither the Syrian army nor rebel fighters are in full control of the quarter, which the government said it had taken on Sunday.

Salaheddine resembled what one journalist called a "ghost town", its shops shuttered, with no sign of life.

Rebel fighters, some in balaclavas and others with scarves around their faces, fired machineguns and assault rifles around street corners at invisible enemies. Wounded civilians and fighters were carried to makeshift dressing stations.

Syrian state television said on Tuesday troops were still pursuing remaining "terrorists" there - its usual way of describing rebel fighters.

A rebel commander in Aleppo said his fighters' aim was to push towards the city center, district by district, a goal he believed they could achieve "within days, not weeks".

The rebels say they now control an arc that covers eastern and southwestern districts.

"The regime has tried for three days to regain Saleheddine, but its attempts have failed and it has suffered heavy losses in human life, weapons and tanks, and it has been forced to withdraw," said Colonel Abdel-Jabbar al-Oqaidi, head of the Joint Military Council, one of several rebel groups in Aleppo.

Oqaidi told Reuters that more than 3,000 rebel fighters were in Aleppo but would not give a precise number.

The fighting has proved costly for the 2.5 million residents of Aleppo, a commercial hub that was slow to join the anti-Assad revolt that has rocked the capital, Damascus, and other cities.

Rebels say they will turn Aleppo into the "grave" of the Assad government. Thousands of residents have fled and those who remain face shortages of food and fuel and the ever-present risk of injury or death.

"We have hardly any power or water, our wives and kids have left us here to watch the house and have gone somewhere safer," said Jumaa, a 45-year-old construction worker, who complained it was nearly impossible to observe the fasting month of Ramadan.

Makeshift clinics in rebel-held areas struggle to deal with dozens of casualties after more than a week of fighting.

Up to 18,000 people have been forced to leave their homes in Aleppo and many frightened residents were seeking shelter in schools, mosques and public buildings, according to figures given by the U.N. refugee agency in Geneva.

Rebel fighters, patrolling parts of Aleppo in pick-up trucks flying green-white-and-black "independence" flags, face a daunting task in taking on the well-equipped Syrian army, even if the loyalty of some of its troops is in doubt.

Armed with Kalashnikov assault rifles, machineguns and rocket-propelled grenades they are up against a military that can deploy fighter jets, helicopter gunships, tanks, armored fighting vehicles, artillery and mortars.

The most powerful military in the region, NATO member Turkey, has been moving armored columns towards the border, although it has given no indication they will cross over.

Turkish Prime Minister Tayyip Erdogan, once a friend of Assad, has become among his most vocal opponents. Erdogan spoke by phone to U.S. President Barack Obama on Tuesday.

"God willing, the brotherly Syrian people and the Middle East will soon be freed from this dictator with blood on his hands, and his regime, which was built on blood," Erdogan said late on Tuesday in a monthly television address.

"Assad and his bloodstained comrades know well that they have reached the end, and that their fates will not be different from those of previous dictators."

Assad, a member of the Alawite minority sect, an offshoot of Shi'ite Islam, is now opposed by the leaders of other Arab states, nearly all of which are led by Sunni Muslims, as well as by Turkey and the West.

Within the region he retains the support of Shi'ite-led Iran, and in the U.N. Security Council he has been protected by China and Russia.

(Additional reporting by Yara Bayoumy in Beirut and Jonathon Burch in Ankara; Writing by Giles Elgood; Editing by Peter Graff and Michael Roddy)

Drought deepens worries about food supplies, prices

A drought-damaged corn field is pictured near Emery, Iowa July 27, 2012. REUTERS/Karl Plume

CHICAGO (Reuters) - Alarm grew over the unrelenting Midwest drought on Tuesday, as one of the top corporate leaders in agriculture warned that the government must act quickly to reduce the amount of corn going to ethanol to prevent a sharp spike in food prices.

Worries about the worst drought in more than half a century afflicting the world's largest grain exporter also deepened overseas, where buyers in China and other hungry nations fret that the expected sharp drop in U.S. harvests will cause shortages and price spikes.

Greg Page, chief executive of global grains trading giant Cargill Inc, joined a chorus of critics of biofuels by urging the U.S. government to temporarily curb its quotas to produce corn-based ethanol fuel.

Page said on CNBC that the U.S. biofuel mandate "needs to be addressed" through existing policy tools. Otherwise, the spike in U.S. corn and soybean prices to record highs will "ration" demand in ways that will hurt food production too much.

"If all of that is only on livestock or food consumers, it really makes the burden disproportionate. What we see are 3 or 4 percent declines in supply lead to 40 to 50 percent increases in prices, and I think the mandates are what drives that," he said.

In 2011, almost 40 percent of the giant U.S. corn crop went into making ethanol, and the United States still exported more than half of all corn shipments worldwide.

"There is a methodology to reduce the amount of biofuels that is mandated in the U.S," Page said.

The U.S. Agriculture Department last week raised its estimates of food price inflation due to soaringgrain prices tied to the drought, saying prices could rise as much as 3.5 percent this year and another 3-4 percent in 2013, led by meat.

On Monday, U.S. livestock groups appealed to the Environmental Protection Agency (EPA) to curb or suspend the mandate, warning against the ruinous impact of soaring feed costs. Corn and soybean meal make up basic animal feedstuffs.

Page said the shortfall in supply would be "manageable" provided that consumers ration their use, that producers don't impose export constraints and importers don't embark on a panicked buying spree, as some did in 2008 -- a beggar-thy-neighbor approach widely seen to have worsened the price spike.

"We need thoughtful responses from governments. We need to be sure free trade remains. In past periods of shortage of crops, we've had embargoes, which have exacerbated peoples' supply concerns and caused people to take actions that were not helpful to global aggregate food security," he said.

CROP OUTLOOK WORSENS

Grain analysts polled by Reuters pointed to a U.S. corn crop of 11.2 billion bushels, the smallest in six years and down 14 percent from USDA's latest forecast of 12.97 billion. Initial forecasts were for a crop of more than 14 billion bushels.

Soybeans, which were planted later and until now escaped the drought's pressure, are now also being hurt. Analysts predict a 2.834 billion bushel harvest, the smallest in four years, and down from USDA's latest estimate of 3.05 billion bushels.

The drought is hitting other food producers besides Cargill.

Oilseed processor and ethanol producer Archer Daniels Midland Inc reported a larger than expected 25 percent drop in quarterly profit on Tuesday due in part to higher corn prices causing it to lose money making ethanol.

"In a challenging fourth quarter, solid results from our global oilseeds business, particularly in South America, were more than offset by negative U.S. ethanol margins and weaker U.S. merchandising results." ADM CEO Patricia Woertz said.

Brokerage BB&T Capital Markets last week lowered its earnings forecasts for U.S. pork producer Smithfield Foods Inc and U.S. chicken producer Sanderson Farms Inc, citing corn prices.

But some said that easing off ethanol production -- already at a two-year low amid soaring corn prices -- was unnecessary.

In Iowa, the largest U.S. corn and soybean producer, Gov. Terry Branstad said on Tuesday he opposed an ethanol waiver.

"Even if you took that kind of action, it probably would have no action on soybean and corn prices," Branstad said.

Ray Bardole of Rippey, Iowa, a soybean farmer and industry official now touring China, told reporters by phone that he has been reassuring the worried Chinese, who are the biggest importers of U.S. soybeans.

"As we have met with folks from the government, as well as the Chinese media and our customers themselves, that is absolutely the very top thing on their mind," he said. "'What is the dry weather going to do to our supply?'"

At the Chicago Board of Trade corn and soybean markets eased back from new record highs this week as traders took their profits. Even with Tuesday's drop, corn prices are up 20 percent in July to post the biggest two-month rally since the last major drought in 1988.

December corn futures closed down 1.1 percent at $8.05-1/4 per bushel and November soybeans closed down 0.2 percent at $16.41 per bushel.

"We are continuing to see a deterioration of the crops," grains analyst Karl Setzer of MaxYield Cooperative in West Bend, Iowa said, referring to the U.S. Department of Agriculture's crop progress report issued on Monday.

That report said 24 percent of the domestic corn crop was in good-to-excellent condition as of Sunday, down from 26 percent the previous week. That was a tad better than trade expectations for a three-point drop.

The soybean crop was 29 percent in that category, down from 31 percent in the previous week.

Those ratings were the worst for those crops since the last major drought in 1988.

(Additional reporting by Jonathan Leff and Brian Winter. Editing by Peter Bohan and Leslie Gevirtz)