GRAINS-Soy near two-month top on poor U.S. weather, China sales

(New throughout; updates prices, adds quotes, dateline; changes byline) CHICAGO, Oct 15 (Reuters) - U.S. soybean futures neared a two-month high on Monday on poor Midwest harvest conditions, coupled with reminders of strong domestic crushing demand and signs of U.S. soy cargoes headed to China, analysts said. Corn and wheat followed the firm trend. As of 1:06 p.m. CDT (1806 GMT), Chicago Board of Trade November soybean futures were up 20-1/2 cents at $8.88 per bushel after reaching $8.89, the contract's highest since Aug. 21. CBOT December corn was up 3-3/4 cents at $3.77-1/2 a bushel and December soft red winter wheat was up 5 cents at $5.22-1/4 a bushel. Soybeans led the rally on worries that wet and cold conditions in the Midwest that have slowed the harvest could also lead to quality problems with soybeans and corn. Drier weather is expected in the second half of October, but heavy rains last week may have damaged some crops. "We had reports of that toward the end of last week, and I think the rest of the world is waking up to it," said Don Roose, president of Iowa-based U.S. Commodities. "It's funds getting out and adding risk premium to the market." Ahead of the U.S. Department of Agriculture's weekly crop progress report due later on Monday, analysts on average expected the government to show the harvest of both the U.S. corn and soybean crops as 40 percent complete. Additional support stemmed from the USDA's weekly export inspections report, which showed two U.S. soybean cargoes earmarked for mainland China, the first since mid-September.

U.S. soy sales to China, by far the world's largest soy importer, have stalled in recent months due to an ongoing trade dispute. The inspections data suggest China is covering needs until the South American soy harvest begins in early 2019, said analyst Terry Reilly with Futures International in Chicago. "If we see these numbers rise in the weekly inspections," Reilly said, "then we know China is in real need of beans, and they will pay up for it." Domestically, the National Oilseed Processors Association said its members crushed 160.8 million bushels of soybeans in September, topping an average of trade expectations for 158.9 million. Corn rose on short-covering and ideas that the U.S. corn yield might be lower than the USDA's Oct. 11 forecast of 180.7 bushels per acre. "Traders are still expecting the U.S. corn yield to decline in November," Reilly said. Commodity funds hold a net short position in CBOT corn, soybean and wheat futures, leaving all three markets vulnerable to bouts of short-covering.

CBOT prices as of 1:05 p.m. CDT (1805 GMT):

Net Pct Volume

Last change change

CBOT wheat WZ8 522.25 5.00 1.0 40489 CBOT corn CZ8 377.50 3.75 1.0 170887 CBOT soybeans SX8 887.75 20.25 2.3 112889 CBOT soymeal SMZ8 326.70 9.80 3.1 58572 CBOT soyoil BOZ8 29.65 0.26 0.9 39135

NOTE: CBOT December wheat and corn and November soybeans shown in cents per bushel, December soymeal in dollars per short ton and December soyoil in cents per lb.

(Additional reporting by Naveen Thukral in Singapore and Sybille de La Hamaide in Paris; Editing by Jan Harvey and Dan Grebler)