GRAINS-Corn, soy, wheat fall on global growth worries

(New throughout, updates prices, market activity to close)
* Corn retreats on risk aversion, global economy concern
* Additional pressure from softening domestic, export demand
* Worries about dry U.S. crop weather take a back seat
* Soybeans, wheat follow corn lower

By Julie Ingwersen
CHICAGO, June 21 (Reuters) - U.S. corn, soy and wheat
futures fell on Thursday as profit-taking and concerns about a
slowdown in global economic growth overshadowed worries about
dry weather threatening U.S. crop prospects.
Grains and other commodities weakened after data showed
Chinese, European and U.S. manufacturing activity slowing
further and risk aversion swept across financial markets.
Grains "would be up double-digits if it were not for the
outside markets, specifically the crude oil market and this
'risk-off' mindset," said Mike Zuzolo, president of Global
Commodity Analytics in Lafayette, Indiana.
Business activity across the euro zone shrank in June for a
fifth straight month, and Chinese manufacturing contracted,
while weaker overseas demand slowed U.S. factory growth, surveys
showed. The HSBC Flash Purchasing Managers Index, the earliest
monthly indicator of China's industrial activity, fell to a
seven-month low of 48.1 in June from 48.4 in May.

"We've had several piece of economic news that would say we
are slowing down. So the fund mindset right now is, 'why buy
grains,' even though the weather says you should be buying
them," Zuzolo said.
At the Chicago Board of Trade, July corn fell 25-1/4
cents, or 4 percent, its biggest decline in a month, to settle
at $5.86-1/2 per bushel. Most-active December ended down
16-1/2 cents at $5.50.
July wheat ended down 2-1/4 cents at $6.61-3/4 per
bushel.
July soybeans fell 8 cents at $14.38-1/2 a bushel
while new-crop November ended down 24-1/4 cents at
$13.71-1/4.

CORN DEMAND SOFTENING
Along with the economic worries, nearby corn was pressured
by softer cash markets. Two ethanol plants in Nebraska were
temporarily idled in recent days due to poor profit margins, and
on Thursday the spot basis bid for corn at Decatur, Illinois, a
key processing site, fell sharply, reflecting slowing demand.
As well, weekly corn export data fell below trade
expectations. The U.S. Department of Agriculture reported export
sales of U.S. corn in the latest week at 381,000 tonnes,
including sales for the current and new marketing years. The
figure fell below trade estimates for sales of 450,000 to
650,000 tonnes.
Traders set aside worries about dry crop weather that
supported the market this week, as temperatures cooled slightly
and rain fell in parts of Illinois. However, an updated
long-term forecast from the National Oceanic and Atmospheric
Administration indicated above-normal temperatures across most
of the Midwest through July.
"We're in a weather market and it's bullish, but the
outsides aren't helping at all right now," said Tom Uhlman, an
independent local trader.

SOYBEANS END LOWER BUT DEMAND UNDERPINS NEARBYS
Soybeans followed the weak trend, but front-month July was
underpinned by strength in soymeal after the USDA reported
export sales of U.S. soymeal in the latest week at 282,000
tonnes, most of it for the 2011/12 marketing year, topping trade
expectations for 50,000 to 150,000 tonnes.
"The trade is probably estimating that we are going to
continue to tighten on old-crop (soybean) supplies, but we have
the potential for good new-crop supplies if we get rains,"
Zuzolo said.
CBOT wheat fell on spillover pressure from corn and strength
in the U.S. dollar, which makes U.S. grain less competitive on
the world market. But losses were limited by fears that world
wheat production this year might fall short of expectations.
"There is a sense out there that global wheat production is
falling," said Jim Gerlach, president of A/C Trading in Fowler,
Indiana.
But economic worries dragged down the thinly traded
Minneapolis spring wheat market. Front-month July spring wheat
settled 1/2 cent lower at $8.43-3/4 per bushel after
surging in early trade to $8.76, a seven-month high on the
continuous price chart.
The spot July contract was supported by tight supplies of
deliverable MGEX spring wheat due to a lack of farmer selling,
traders said. As well, those holding short positions in MGEX
July wheat struggled to exit the market ahead of options
expiration on Friday and the start of the contract's delivery
period next week.

Prices at 3:56 p.m. CDT (2056 GMT)
LAST NET PCT YTD
CHG CHG CHG
CBOT corn 586.50 -25.25 -4.1% -9.3%
CBOT soy 1438.50 -8.00 -0.6% 20.0%
CBOT meal 429.00 1.60 0.4% 38.7%
CBOT soyoil 49.81 -1.00 -2.0% -4.4%
CBOT wheat 661.75 -2.25 -0.3% 1.4%
CBOT rice 1433.50 -16.00 -1.1% -1.8%
EU wheat 214.25 1.75 0.8% 5.8%

US crude 78.16 -3.29 -4.0% -20.9%
Dow Jones 12,574 -251 -2.0% 2.9%
Gold 1566.05 -39.33 -2.4% 0.1%
Euro/dollar 1.2541 -0.0162 -1.3% -3.1%
Dollar Index 82.3410 0.7580 0.9% 2.7%
Baltic Freight 978 6 0.6% -43.7%
* CBOT prices in cents per bushel except for soymeal in
dollars per ton, soyoil in cents per lb and rice in cents per
hundredweight. Paris futures prices in euros per tonne.

(Additional reporting by Sam Nelson in Chicago, Colin Packham
in Sydney and Sybille de La Hamaide in Paris; Editing by Himani
Sarkar, Jason Neely, Phil Berlowitz and David Gregorio)