GRAINS-Soybeans rally as dry weather threatens U.S. yields
* Dry Midwest forecast this week to trim soy yields
* Corn sinks on weak cash market, wheat follows
* Soy, corn crop conditions seen falling in weekly report
(Rewrites throughout, adds quotes, details, changes dateline from LONDON, changes byline) CHICAGO, Sept 3 (Reuters) - U.S. soybean futures surged more than 2 percent on Tuesday as dry weather in key production areas of the U.S. farm belt eroded crop conditions and threatened yield prospects. But corn futures fell nearly 2 percent on weak cash markets as the harvest crept northward from the southern United States, where some farmers produced record-large yields, to the heart of the Corn Belt. The U.S. Agriculture Department's ratings of both crops were expected to drop following recent dry weather and severe heat, but the soybean crop was much more vulnerable to the stressful weather as the corn crop was closer to maturity. Analysts expect the percentage of the U.S. soybean crop rated good to excellent to fall 4 points in a weekly USDA report due later in the day, while corn conditions were expected to drop 3 percentage points. Modest rainfall over the weekend missed some of the driest areas of the Midwest, and the weather was expected to be dry this week, forecasters said. "Rains over the weekend were pretty good in the Missouri Valley but not so much elsewhere and that's what's driving soybeans higher today," said Sterling Smith, futures specialist for Citigroup. Commodity Weather Group meteorologist Joel Widenor said the weekend rains were better than expected along the Iowa-Nebraska border but missed many of the driest Midwest soybean areas. "About 40 percent of the soybean belt remains severely dry and will continue to see yield losses mount as growth finishes up," he said. November soybeans on the Chicago Board of Trade rose 32 cents, or 2.4 percent, to $13.89-1/2 per bushel by 10:45 a.m. CDT (1545 GMT) after nearly matching last week's 11-month high of $14.09-1/2 a bushel. Corn followed soybeans higher early but buying interest faded under pressure from a rising harvest and limited export demand amid competition from lower-cost suppliers such as Ukraine and Brazil. December corn futures fell 9 cents, or 1.9 percent, to $4.73 per bushel, their steepest drop in a week. Selling accelerated as prices fell below the 50-day moving average around $4.88-1/2 a bushel. "Corn is weakening on some pretty big drops in basis in the cash market, especially in the central part of the country," said Mike Zuzolo, president of Global Commodity Analytics. Cash corn basis bids around the Midwest have eroded in recent days. The bid at a closely watched Decatur, Illinois, processor was the lowest in two months. Wheat futures followed corn lower, with additional pressure from weak export demand. Actively traded December wheat fell 7-1/2 cents, or 1.2 percent, to a 1-1/2 week low of $6.46-1/2 a bushel.
Prices at 10:46 a.m. CDT (1546 GMT)
LAST NET PCT YTD CHG CHG CHG CBOT corn 488.25 -6.75 -1.4% -30.1% CBOT soy 1440.50 16.50 1.2% 1.5% CBOT meal 484.50 16.30 3.5% 15.2% CBOT soyoil 44.07 0.18 0.4% -10.4% CBOT wheat 635.75 -7.50 -1.2% -18.3% CBOT rice 1575.00 0.00 0.0% 6.0% EU wheat 189.00 -1.00 -0.5% -24.5% US crude 108.00 0.35 0.3% 17.6% Dow Jones 14,817 7 0.1% 13.1% Gold 1406.30 12.01 0.9% -16.0% Euro/dollar 1.3154 -0.0036 -0.3% -0.3% Dollar Index 82.4400 0.3530 0.4% 3.3% Baltic Freight 1168 29 2.6% 67.1%
(Additional reporting by Sam Nelson; editing by Jim Marshall)