GRAINS-U.S. soy rises, wheat and corn drop in choppy trade

* Soybeans recover from initial losses as China steps in
* Corn, wheat drop for fifth day in a row
* Traders watching weather as Isaac strengthens to hurricane

(Updates prices, adds new analyst quote)
By Mark Weinraub
CHICAGO, Aug 28 (Reuters) - U.S. soybean futures rose on
Tuesday as early weakness after Monday's lower close gave way to
short-covering amid signs of good export demand, traders said.
Wheat and corn fell, their fifth straight day of declines,
but trading was choppy in thin volume ahead of the U.S Labor Day
holiday. Prices for all three commodities bounced between
positive and negative territory during the session.
Investors were wary of staking out new positions,
remembering when grain markets experienced a two-month long
breakdown in 2011 after peaking in late August, traders said. A
year ago, soybean futures fell 16.7 percent and corn prices
dropped 14.6 percent even as harvest fell below expectations.
"I think it is a case of harvest pressure starting and a
bull market that is a little tired," said Bob Utterback of
Utterback Marketing Services, a brokerage for farmers. "We know
that supplies are reduced. You just had the culmination of too
many longs in the market."
Traders were also keeping a close watch on Hurricane Isaac,
which strengthened from a tropical storm on Tuesday morning and
is expected to make landfall on the U.S. Gulf Coast early
Wednesday.
The expected torrential rainfall and localized flooding
would add valuable soil moisture to a large chunk of
drought-stricken cropland, but the initial impact will likely
stall early harvest of corn and soybeans and could lead to crop
diseases, agricultural meteorologist Don Keeney of MDA EarthSat
Weather said.
Although some late-planted soybean fields could benefit from
additional moisture, rain might only provide a psychological
boost in many areas because the soy crop is more mature than
ever for this point in the season, said Mark Schultz, chief
analyst with Northstar Commodity Investment Co.
Chicago Board of Trade November soybean futures closed up
3-1/2 cents at $17.22-1/4 a bushel. Prices were 2.2 percent
below the contract high of $17.60-1/2 hit early on Monday, which
traders said increased the chances for more export deals.
Private exporters reported the sale of 110,000 tonnes of
U.S. soybeans to China for delivery in the new marketing year,
the U.S. Agriculture Department said on Tuesday.
"We are also having Chinese buying showing up again
underneath the market," said Jim Hemminger, senior risk manager
with Top Third Ag Marketing. "It seems like every time the beans
break a little ... then we find very good Chinese buying, and we
are finding that again here."
CBOT September soft red winter wheat fell 7-1/4 cents
to $8.54-3/4 a bushel while new-crop December corn dropped
5-1/4 cents to $7.95-1/2 a bushel. Corn has dropped nearly 5
percent and wheat 5.1 percent during the five-session losing
streak.
"The key corn contracts are losing the battle with $8, as
falling crop ratings and hot weather are old hat by now," Matt
Zeller, market analyst with INTL FCStone, said in a research
note. "The bears are relieved to see at least some rain in the
forecast thanks to (Hurricane) Isaac, even though the trade can
agree on the system's likely limited 2012 crop impact either
way."
Farmers have slowed harvest to allow crops to dry after
recent rains but remain on a record pace. The latest U.S.
Department of Agriculture harvest progress report, released at
the end of trading on Monday, showed the corn harvest was 6
percent complete as of Aug. 26, up just 2 percentage points from
a week earlier, and below analyst expectations for 10 percent.

Besides slowing harvest, the storm has already disrupted
shipping. Grain companies Cargill Inc and Archer Daniels Midland
Co shut down some export elevators in Louisiana as a
precaution.
Barge traffic along the Mississippi River between Baton
Rouge, Louisiana, and the U.S. Gulf has also been suspended. The
river is a major channel for the movement of grains produced in
the Midwest farm belt to export terminals at the Gulf of Mexico
for shipment around the world.
With corn stalk development hindered by the worst drought
across the Midwest in 56 years, the high winds could flatten
crops, analysts warned.

Prices at 3:02 p.m. CDT (2002 GMT)
LAST NET PCT YTD
CHG CHG CHG
CBOT corn 789.50 -5.00 -0.6% 22.1%
CBOT soy 1732.50 2.75 0.2% 44.6%
CBOT meal 534.20 2.40 0.5% 72.7%
CBOT soyoil 55.73 -0.18 -0.3% 7.0%
CBOT wheat 854.75 -7.25 -0.8% 30.9%
CBOT rice 1538.50 7.50 0.5% 5.3%
EU wheat 260.75 0.50 0.2% 28.8%

US crude 96.17 0.70 0.7% -2.7%
Dow Jones 13,103 -22 -0.2% 7.2%
Gold 1666.46 2.86 0.2% 6.6%
Euro/dollar 1.2567 0.0068 0.5% -2.9%
Dollar Index 81.3310 -0.3270 -0.4% 1.4%
Baltic Freight 724 7 1.0% -58.3%
In U.S. cents, benchmark contracts, except EU wheat (euros) and
soymeal (dollars). CBOT wheat, corn and soybeans per bushel,
rice per hundredweight, soymeal per ton and soyoil per lb.

(Additional reporting by Colin Packham in Sydney and Ivana
Sekularac in Amsterdam; Editing by Sofina Mirza-Reid and Jim
Marshall)