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GRAINS-Corn edges lower, adverse weather outlook underpins weekly gains

* Corn set to finish week up 3.5 percent

* Soybeans fall, on course for weekly gains

* Wheat poised to extend weekly losses in second week

SYDNEY, July 21 (Reuters) - U.S. corn edged lower on Friday, but the grain was on track to post a weekly gain of around 3.5 pct as forecasts for continued adverse weather stoked fears of production losses. Soybeans were also set to post a weekly gain despite a dip on Friday, while wheat was on course to post its second straight weekly loss. The most active corn futures on the Chicago Board Of Trade were down 0.4 percent to $4.03-1/4 a bushel after closing up 2.1 percent on Thursday when prices hit a high of $4.06-3/4 a bushel - the highest since July 12. "The western U.S. corn belt is hot, moisture is evaporating and weather forecasters see no rainfall to replenish it," said Tobin Gorey, director of agricultural strategy, Commonwealth Bank of Australia. "Yield forecasts are consequently being cut." Recent dry weather has already damaged crops, data from the U.S. Department of Agriculture earlier this week showed. Corn crop condition ratings declined earlier this week in top-producing states of Iowa, Illinois and Nebraska, and extended outlooks for limited rainfall were seen as threatening further downgrades. The most active soybean futures were down 0.3 percent to $10.23-3/4 a bushel after closing up 1.4 percent on Thursday. Soybeans are up nearly 2.5 percent for the week after posting weekly losses of 1.4 percent in the previous week. The most active wheat futures were unchanged at $5.05-3/4 a bushel after closing up 0.5 percent in the previous session. Wheat is down 1 percent for the week, after falling 4.5 percent last week. The U.S. Department of Agriculture early on Thursday reported weekly wheat export sales of 669,500 tonnes, well above trade forecasts that ranged from 250,000 to 450,000 tonnes.

Grains prices at 0205 GMT

Contract Last Change Pct chg Two-day chg MA 30 RSI CBOT wheat 505.75 0.00 +0.00% +0.55% 499.58 50 CBOT corn 402.75 -2.00 -0.49% +1.64% 396.18 62 CBOT soy 1023.75 -3.25 -0.32% +1.11% 970.08 64 CBOT rice 12.01 $0.01 +0.04% +1.18% $11.76 70 WTI crude 46.92 $0.00 +0.00% -0.42% $45.14 60

Currencies

Euro/dlr $1.163 $0.000 +0.01% +1.01% USD/AUD 0.7931 -0.003 -0.33% -0.23%

Most active contracts Wheat, corn and soy US cents/bushel. Rice: USD per hundredweight RSI 14, exponential

(Reporting by Colin Packham)