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GRAINS-Soybeans hit 5-month peak on firm soyoil, S.America weather

* Adverse weather hits Brazil, Argentina soybean output

* Soyoil surges 3 percent on short-covering, higher palm

* Wheat climbs on tight U.S. stocks, good demand prospects

(Updates with closing prices, adds details on soy product rally and gains in wheat, adds quotes) CHICAGO, Feb 18 (Reuters) - U.S. soybean futures surged to a five-month high on Tuesday on robust demand and concerns about smaller crops in key exporters Brazil and Argentina due to adverse weather. Short covering lifted wheat for a third straight session amid strong cash prices and tight domestic stocks following stronger-than-anticipated export demand this season. Corn prices firmed on spillover support from rallying soybeans, but abundant supplies following a record-large U.S. harvest anchored the market. "The U.S. grain trade has been behind in reacting to the weather situation in South America," said Rich Nelson, chief strategist with consultancy Allendale Inc. Analysts at Brazilian consultancy AgRural shaved 1.8 million tonnes off their estimate for Brazil's 2013-14 soybean crop on Monday, saying drought in much of the country in recent weeks had reduced yields. AgRural now expects a crop of 87 million tonnes, down from 88.8 million tonnes previously and well below the U.S. Department of Agriculture estimate for 90 million tonnes. "After the decline in AgRural's soybean production estimate over the weekend, we're wondering if we maybe have to start taking a bit off the expectations we've been talking about over the last couple of weeks," Nelson said. In Argentina's main soybean-growing region, weeks of heavy rain have encouraged the spread of caterpillars that are eating into the 2013/14 season's crop yields, a climate expert said on Monday. The less favourable conditions in South America added to concerns about tight U.S. soybean stocks, which have been whittled down by record-strong export demand. Cancellations of U.S. purchases by China and switching of orders toward South American supplies have also been below expectations. Rallying soy product prices further supported soybeans. Higher palm oil prices triggered short-covering support in soyoil futures while forecasts for another blast of frigid weather next week bolstered soymeal demand. Traders took a below-forecast January soy crush estimate in stride as processing had been expected to fall after occasional plant outages due to frigid weather. The National Oilseed Processors Association said its members crushed 156.943 million bushels of soybeans in January, below the average analyst estimate for 162.4 million. Chicago Board of Trade March soybeans jumped 23-1/2 cents, or 1.8 percent, to $13.61 per bushel, the highest for a spot-month contract since Sept. 19. March soyoil rallied 1.21 cent, or 3.1 percent, to a 2-1/2 month high of 40.36 cents per lb, the steepest spot-month percentage gain since Aug. 26. March soymeal rose $6.90, or 1.5 percent, to $456.90 per ton.

WHEAT RALLIES Firm cash markets fuelled the strongest rally in CBOT soft red winter wheat in two weeks. Hard red winter and hard red spring wheat each added nearly 2 percent. "Wheat is flowing out of delivery terminals in all three markets. And the large spec is short a bunch of wheat, and it's all in the front end," said Charlie Sernatinger, analyst with ED&F Man Capital. A "fairly tight" U.S. wheat balance sheet underpinned prices following unexpected export sales earlier this season to China and Brazil. Shipping problems in Canada, the world's top spring wheat supplier, also boosted demand for U.S. wheat, he said. CBOT March wheat rose 13-1/2 cents, or 2.3 percent, to a six-week peak of $6.12 a bushel, while March HRW wheat gained 11-1/4 cents, or 1.7 percent, to $6.85-3/4 a bushel. March spring wheat gained 12-3/4 cents, or 1.9 percent, to settle at $6.79-1/4 a bushel, a 2-1/2 month high. CBOT March corn added 4-1/4 cents, or 1 percent, to $4.49-1/2 a bushel.

Prices at 1:35 p.m. CST (1935 GMT)

LAST NET PCT YTD CHG CHG CHG CBOT corn 449.50 4.25 1.0% 6.5% CBOT soy 1361.00 23.50 1.8% 3.7% CBOT meal 456.90 6.90 1.5% 4.4% CBOT soyoil 40.36 1.21 3.1% 4.0% CBOT wheat 612.00 13.50 2.3% 1.1% CBOT rice 1585.50 27.00 1.7% 2.2% EU wheat 199.00 0.75 0.4% -4.8% US crude 102.63 2.33 2.3% 4.3% Dow Jones 16,143 -12 -0.1% -2.6% Gold 1323.09 -5.40 -0.4% 9.8% Euro/dollar 1.3755 0.0048 0.4% 0.8% Dollar Index 80.0140 -0.1220 -0.2% 0.0% Baltic Freight 1146 16 1.4% -49.7%

(Additional reporting by Julie Ingwersen in Chicago, Gus Trompiz in Paris, Naveen Thukral in Singapore; Editing by Alden Bentley and Andrew Hay)