(Recasts, updates with closing prices)
CHICAGO, Feb 12 (Reuters) - Weather concerns sparked a rally in U.S. wheat and soybean futures on Monday, with forecasts for dry conditions threatening to reduce harvests in key growing areas, traders said.
Chicago Board of Trade soft red winter wheat futures jumped 3.4 percent to their highest since Aug. 8 on concerns about dryness damaging the dormant crop in the U.S. Plains.
Soybean futures rose 1.9 percent and settled above the key $10 a bushel benchmark for the first time since Dec. 6, as the latest outlook calls for continued dryness in Argentina, the third largest soy exporter.
Soymeal futures also surged, gaining 4.2 percent on the Argentine weather forecast. Argentina is the top exporter of soymeal.
The strength in wheat and soybeans spilled over into the corn market but the yellow grain's gains were capped by technical selling when prices neared the 5-1/2-month high hit last week.
Traders shrugged off news that China, the world's top buyer of soybeans, canceled export deals to buy 455,000 tonnes of U.S. soybeans for delivery during the 2017/18 marketing year.
"Dry weather is expected this week, which will allow dryness to increase again, stressing corn and soybean development," Kyle Tapley, meteorologist at Radiant Solutions said in a note to clients.
CBOT March soybean futures settled up 18-3/4 cents at $10.01-3/4 a bushel.
Soymeal futures rose $14.00 to $357.80 a ton, with the most-active contract hitting its highest since July 2016.
After rain late last week calmed investor worries about crop damage in Argentina, forecasts calling for a drier week ahead and potentially scorching temperatures stirred up the market again on Monday.
"We're in a weather market with its ups and downs," Sebastien Poncelet of consultancy Agritel said.
Strong weekly export data also underpinned the soybean market.
USDA on Monday morning reported weekly soybean export inspections of 1.319 million tonnes, topping analysts' forecasts that ranged from 800,000 to 1.1 million tonnes. Wheat export inspections were 487,902 tonnes and corn export inspections were 835,131 tonnes. Both were in line with a range of analysts' forecasts.
CBOT March soft red winter wheat settled up 15 cents at $4.64 a bushel.
"There is concern about HRW wheat in the U.S. that is underpinning prices, although the crop situation is far from irreversible," Poncelet said.
CBOT March corn futures were 5 cents higher at $3.67 a bushel. (Additional reporting by Colin Packham in Sydney and Gus Trompiz in Paris, editing by Tom Brown and Chizu Nomiyama)