GRAINS-Soy, corn slip, take breather from drought rally

* Soybeans pressured by cooler, wetter U.S. weather
* Corn dips on profit-taking after hitting record high on
Friday
* Market eyes demand rationing, prices to remain high
* Wheat lower as global supply fears ease

(Updates with closing prices, USDA crop ratings)
By Julie Ingwersen
CHICAGO, Aug 13 (Reuters) - U.S. new-crop soybean futures
fell more than 2 percent on Monday as improving weather in the
Midwest crop belt brightened crop prospects and helped trigger a
round of fund long liquidation.
Wheat extended losses to 6 percent over two sessions and
fell to a near three-week low as fears of shortfalls in key
global growing areas eased.
Corn futures fell 2 percent on pressure from the approaching
U.S. harvest and profit-taking from last week's record-high
prices, although worries about supplies following this summer's
historic drought underpinned the market.
Soybean futures at the Chicago Board of Trade tumbled on
cooler temperatures and light rains in the Midwest that could
boost prospects for late-planted soybeans.
"How much improvement we will get, we don't know, but
probably in the deep southern areas and the northern areas the
crop can benefit from the recent rainfall," said Anne Frick with
Jefferies Bache in New York.
"I would suspect we are going to see an increase in crop
condition ratings tonight, and I think that is being reflected
in the prices," Frick said.
After the close, the U.S. Department of Agriculture said 30
percent of the U.S. soybean crop was rated in good to excellent
condition, up 1 percentage point from the previous week and in
line with a pre-report Reuters poll of analyst expectations.

Ratings for corn, which have fallen for nine straight weeks
due to the worst drought in 56 years, were unchanged at 23
percent good to excellent -- also in line with trade
expectations.
At the CBOT, most-active November soybeans settled
down 43 cents, or 2.6 percent, at $16.00-3/4 per bushel.
September wheat fell 28-1/2 cents, or 3.2 percent, to
$8.56-3/4 a bushel. Benchmark December corn ended down 17
cents, or 2.1 percent, at $7.92-1/4 per bushel.
Commodity funds were net sellers of 16,000 contracts of
corn, 12,000 of soybeans and 7,000 of wheat, trade sources
estimated.
Soybeans set back in spite of a big cut in the U.S.
Department of Agriculture's U.S. 2012/13 soybean production and
stocks estimates on Friday.
"We had a tepid response on Friday to the bullish numbers,
and that says the market might be a little tired," Frick said.
The approach of the corn harvest, coupled with anecdotal
reports that combines have already begun rolling in scattered
areas of the Midwest, pressured corn futures. CBOT December corn
has fallen nearly 7 percent from its peak of $8.49, the all-time
high for any corn contract, set on Friday.
USDA did not issue a figure on the progress of the corn
harvest but said it expected to issue its first such figure in
its next weekly report. The government said 10 percent of the
corn crop was mature, ahead of the five-year average of 3
percent.
"With harvest around the corner, or actually starting in
some places, there is no sense of urgency to bid up for
anything," said Bill Gentry, a broker with Risk Management
Commodities in Lafayette, Indiana.
However, the market found underlying support and bounced off
session lows, supported by the USDA's forecast on Friday for
U.S. corn inventories to drop to a 17-year low by next summer.
The USDA last week slashed its estimate of U.S. corn
production and cut its forecast of U.S. 2012/13 corn ending
stocks to 650 million bushels, the smallest since 1995/96.
"We will continue to find strong underlying support off the
tight balance sheet," said Shawn McCambridge with Jefferies
Bache in Chicago.

FOOD-VERSUS-FUEL DEBATE
USDA's corn stocks forecasts intensified fears that the
world is heading for a repeat of the 2008 food supply crisis.

The aggressive stance of the USDA reflected the severity of
the damage from a drought centered in the U.S. Midwest farm
belt, which grows 75 percent of the country's corn and soy crops
that are used for food, feed and biofuels.
The rally in grain prices has renewed the food-versus-fuel
debate centered on the U.S. ethanol mandate, as 40 percent of
the corn crop will be made into fuel for cars and trucks.
France, the United States and G20 president Mexico will hold
a conference call at the end of August to discuss whether an
emergency international meeting is required to tackle soaring
grain prices caused by the worst U.S. drought in half a century.

CBOT WHEAT UNDER PRESSURE
CBOT wheat fell on follow-through selling after the USDA on
Friday raised its estimates for U.S. wheat production. The
market was also pressured by smaller-than-expected cuts in
global wheat production, especially in Russia, despite inclement
weather dimming eastern Europe crop prospects.
Wheat prices have dropped for the last two weeks but
are up more than 40 percent since mid-June.
There have been persistent rumors that Russia could curb
exports to preserve supplies, as it did in 2010 when its crops
were devastated by a drought. But over the weekend Egypt, the
world's biggest wheat importer, bought 120,000 tonnes of Russian
wheat.
"The Russian sale to Egypt kind of takes the notion they are
going to restrict exports off the board here, at least for the
short term," McCambridge at Jefferies Bache said.
"If we see production areas remain very dry coming up to
2013/14 winter wheat planting season, and if they are aggressive
on the front end of this export market, it could force the
(Russian) government's hand to slow things down," he said.

Prices at 2:37 p.m. CDT (1937 GMT)
LAST NET PCT YTD
CHG CHG CHG
CBOT corn 782.75 -17.25 -2.2% 21.1%
CBOT soy 1622.25 -51.00 -3.1% 35.4%
CBOT meal 504.80 -16.30 -3.1% 63.2%
CBOT soyoil 53.10 -0.68 -1.3% 1.9%
CBOT wheat 856.75 -28.50 -3.2% 31.3%
CBOT rice 1565.50 -29.00 -1.8% 7.2%
EU wheat 256.75 -7.25 -2.8% 26.8%

US crude 92.75 -0.12 -0.1% -6.2%
Dow Jones 13,167 -41 -0.3% 7.8%
Gold 1610.50 -8.94 -0.6% 3.0%
Euro/dollar 1.2333 0.0054 0.4% -4.7%
Dollar Index 82.4200 -0.1330 -0.2% 2.8%
Baltic Freight 764 -10 -1.3% -56.0%

(Additional reporting by Ivana Sekularac in Amsterdam and
Naveen Thukral in Singapore; editing by John Wallace, Marguerita
Choy and Jim Marshall)