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GRAINS-U.S. soy, corn weaken as crop outlook improves

LONDON/SINGAPORE, 23rd September 2009 (Reuters) By Nigel Hunt and Naveen Thukral

Soybean and corn futures fell on Wednesday as a favourable weather outlook boosted prospects for U.S. crops.

"The weather has been fantastic (in the U.S.). There is not much sign of frost on the horizon," said VM Group analyst Gary Mead, adding that the prospect of large U.S. crops was the main factor weighing on prices.

Late development of this year's U.S. corn crop has meant traders have been closely monitoring weather forecasts for any sign of an early frost.

"Warmer temperatures continue to improve crop development. There is no damaging cold in sight," Meteorlogix said in an updated forecast on Wednesday.

Chicago Board of Trade November delivery soybeans fell 10-3/4 cents to $9.11-1/4 by 1036 GMT while December corn eased 4 cents to $3.21-3/4.

VM Group's Mead said, however, that the scope for further losses may be limited, with dry weather possibly set to cap the size of soybean crops in South America while fresh demand from China may also help to boost prices.

"I don't see them (soybean prices) falling much below this level because those two factors are still on the cards. We could see prices rise from here even with a huge U.S. crop," he said.

Analysts said the market was also watching weather in China, the world's second largest corn producer, where a drought threatens to cut this year's harvest.

The drought in China's main corn-growing areas may cut this year's harvest by 12 million tonnes, or 7.5 percent, from 160 million tonnes in 2008, China's largest grain trader and corn processor, COFCO, said.

China's agriculture minister has said the country is still expecting a bumper harvest of autumn grain, despite major growing areas in the northeast suffering drought and early frost.

U.S. wheat held steady but prices in the European Union fell under pressure from the recent strength of the euro against the dollar, which made it difficult for eurozone exporters to secure sales.

CBOT December wheat rose 1/4 cent to $4.56 a bushel while November milling wheat in Paris eased 0.25 euros to 120.75 euros a tonne.

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