RTRS:GRAINS-Wheat eases after new highs, weather still in focus
* U.S. wheat turns lower after 8-1/2-mth peak, Paris also down
* Dryness in U.S., Russia, Australia still a concern
* USDA weekly crop progress report awaited
* Corn trims earlier rise, soy higher with oil
(Updates with European trading, previous SYDNEY/SINGAPORE)
PARIS, May 21 (Reuters) - U.S. and European wheat turned lower on Monday as
investors booked some profits after prices earlier set fresh highs for the year
on continuing concern that dry weather in the United States and Russia will cut
production in major exporters.
Chicago Board of Trade wheat climbed as much as 3.8 percent during Asian
trading to hit an 8-1/2 month high, before slipping back below the $7 a bushel
barrier in step with easing European wheat prices in Paris.
CBOT wheat soared around 17 percent last week, its biggest weekly gain since
1992, as market participants grew nervous about dry, hot conditions in parts of
the U.S. Plains and in southern Russia, encouraging investment funds to cover
short positions in wheat.
By 1125 GMT, CBOT wheat for July delivery was down 1.22 percent at
$6.86-3/4 a bushel. It earlier rose to $7.22 a bushel, the highest since Sept. 7
on a continuation chart.
In Paris, November milling wheat was 1.16 percent lower at 212.75
euros a tonne, after climbing in opening trade to 218.75 euros, a new high for
the contract since June 9, 2011.
The fall in Paris was fuelled by selling by farmers seeking to lock in
current prices, traders said.
"We're still in an upward trend, with a slight correction after the strong
rise of last week," a European trader said. "People have realised that wheat
production is not done and dusted yet."
Scorching temperatures and high winds in important growing areas of the U.S.
Plains have sapped soils of needed moisture and dented earlier expectations of a
bumper U.S. hard red winter wheat crop.
This has coincided with dry conditions in parts of southern Russia, reviving
memories of a devastating Russian drought two years ago that caused upheaval in
grain markets.
Dry weather in Australia, which is delaying sowing in what is another major
wheat producer and exporter, has added to weather concerns.
"The weather outlook in Russia doesn't look great," said one Melbourne-based
analyst. "We are less concerned about the U.S. but certainly if the black soils
in Russia and Ukraine turn dry, it could be devastating to the crops."
Market participants will be looking closely at weekly U.S. crop ratings
released later on Monday by the U.S. Department of Agriculture for further signs
of the impact of dryness.
A decline in the rating for U.S. winter wheat last week helped spark the
rally in Chicago.
Corn, which drew strength from the wheat rally last week, trimmed gains from
earlier on Monday but stayed in positive territory.
July corn rose 0.50 percent to $6.36 a bushel, after earlier hitting a
10-day high on the front-month chart.
Investors who have been building weather-risk premiums in U.S. wheat are
expected to expand their protective play into corn this week amid forecasts for
high heat and little rain.
Temperatures are set to rise in the southern portion of the Midwest grain
belt, which produces the bulk of the country's corn and soybeans, and in the
Mississippi Delta, where the Southern corn harvest precedes that in the Midwest.
This could undermine current USDA projections for a sharp rebound in corn
supplies tied to a forecast record crop.
Soybeans, which last week posted a first weekly gain in three weeks after
heavy liquidation earlier this month, rose with support from higher crude oil.
July soybeans added 0.52 percent to $14.12-1/4 per bushel.
But fragile confidence remains in financial markets, which are wary about
the euro zone despite world leaders calling for Greece to stay in the monetary
union and for Europe to balance austerity with growth.
