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GRAINS-Soy slips, hard red winter wheat jumps as traders watch weather

* More dry weather expected in rival exporter Argentina

Soy supplies seen ample despite Argentine crop concerns

* Short-covering propels wheat higher, traders say (Adds closing prices, analyst quote, estimates for fund activity)

By Tom Polansek

CHICAGO, Jan 26 (Reuters) - U.S. soybean futures sagged on Friday, pulling back from a rally above $10 a bushel a day earlier, while hard red winter wheat futures climbed to their highest price in more than three months.

Traders in both markets were eyeing unfavorably dry weather in important growing areas: Argentina for soybeans and the southern U.S. Plains for wheat. Next week, they will watch forecasts for signs of relief.

A wetter weather pattern could begin to replenish moisture in the south-central U.S. Plains, while more dryness is expected across major growing areas of Argentina, according to U.S.-based weather firm Radiant Solutions.

Argentina is the world's No. 3 exporter of soybeans and corn and the No. 1 supplier of soymeal livestock feed.

"The weather in Argentina still remains a wild card," said Kevin Van Trump, president of U.S. consultancy Farm Direction.

Big harvests in Brazil and the United States, the world's top two soybean exporters, may offset crop losses in Argentina, traders said. Global supplies are ample, with the U.S. Department of Agriculture (USDA) projecting world soybean inventories at an all-time high at the end of the 2017/18 marketing year.

The most actively soybean traded contract closed down 6-3/4 cents at $9.85-1/2 a bushel at the Chicago Board of Trade, after touching a seven-week high of $10.02 a bushel on Thursday.

CBOT March wheat ended up 6-1/2 cents at $4.41 a bushel. Earlier in the session, it traded to $4.42-1/2, the highest price for the most actively traded contract since Dec. 4.

The most actively traded Kansas City hard red winter wheat contract advanced 8 cents to $4.43 and reached its highest price since Oct. 3 at $4.44-1/2.

"Dryness across the southern U.S. could cut 2018's harvested area like last year," said Jerry Gidel, grain strategist for Price Futures Group in Chicago.

CBOT March corn rose 1-1/4 cents to $3.56-1/2 a bushel.

Private exporters struck deals to sell 125,000 tonnes of U.S. corn to unknown destinations, the USDA said on Friday. The agency announced a sale of the same volume of corn to unknown destinations on Wednesday.

Commodity funds were net sellers of an estimated 5,500 soybean contracts at the CBOT, traders said. They were net buyers of an estimated 3,000 corn contracts and 4,500 wheat contracts. (Additional reporting by Nigel Hunt in London and Naveen Thukral in Singapore; Editing by Elaine Hardcastle and Sandra Maler)