GRAINS-Corn, soy drop for 2nd day on wetter Midwest forecast

* Updated forecasts call for more rain, less heat
    * Corn losses partly offset by good export sales
    * Spread unwinding, technical selling hurts soybeans
    * Wheat sinks on spillover pressure from corn, soy

 (Updates with closing prices)
    By Karl Plume
    CHICAGO, July 18 (Reuters) - U.S. corn and soybean prices
retreated for the second straight day on Thursday as forecasts
for milder temperatures and slightly more rain across much of
the Midwest lessened worries about crop damage.
    Slight adjustments to weather forecasts have steered the
grains markets recently. Corn has been jarred most because the
crop will be pollinating in coming weeks, a critical development stage when severe heat and a lack of rain can hurt yields most. Occasional showers and a lack of extreme heat were expected across much of the Corn Belt over the next two weeks. That is better for crops than a previous forecast for hot, dry weather, which had sent grain prices soaring. "It's turned wetter today, even wetter than yesterday which will certainly help, there's definitely some improvement in the forecast seen for the next 10 days," said Don Keeney, meteorologist for MDA Weather Services. Strong corn export sales last week helped to offset some of the pressure in corn from the bearish weather forecast. The U.S. Department of Agriculture said net corn sales in the week ended July 11 were more than 1.7 million tonnes for the current and new marketing years. Analysts had expected up to 1.6 million tonnes. Unwinding of new-crop corn/soybean spreads also limited losses in corn, but put pressure in soybeans. The price ratio of December corn and November soybeans was 2.56-to-1 as of the close Wednesday. "That's the highest we've been since the fall of 2009 on my monthly continuation chart so we're seeing some inter-commodity
spread unwinding today. They're buying back December corn shorts and selling out of their November beans," said Mike Zuzolo, president of Global Commodity Analytics. Chicago Board of Trade December corn fell 1-1/4 cents, or 0.3 percent, to $5.00-3/4 a bushel after earlier hitting a 10-day low of $4.94. It was the contract's fourth decline in five sessions. CBOT November soybeans dropped 17-3/4 cents, or 1.4 percent, to $12.65-3/4 per bushel. Technical selling developed as prices fell below the 50-day moving average around $12.68-1/2 to add pressure. WHEAT RETREATS Wheat turned lower after early short-covering support faded, with prices pressured by harvesting progress of the winter crop and spillover from weaker corn and soybeans. A large purchase of wheat from the Black Sea region by Egypt's GASC, the country's price-conscious state wheat buyer, at a steep discount to U.S. prices underscored the challenges that soft red winter wheat exports face in the world market. "They bought all Black Sea wheat and it traded on a landed basis $40 a tonne cheaper than U.S. wheat," said Roy Huckabay, analyst with the Linn Group. Declines in hard red winter wheat futures were limited as Brazilian importers are expected to return for more of the
variety following recent large purchases. CBOT September soft red winter wheat dropped 4-1/2 cents, or 0.7 percent, to a 10-day low of $6.60-1/2 a bushel while September hard red winter wheat shed 1/2 cent to $7.02-1/4 a bushel. Prices at 1:42 p.m. CDT (1842 GMT) LAST NET PCT YTD CHG CHG CHG CBOT corn 541.00 2.50 0.5% -22.5% CBOT soy 1469.25 -8.25 -0.6% 3.6% CBOT meal 470.40 1.30 0.3% 11.8% CBOT soyoil 45.52 -0.27 -0.6% -7.4% CBOT wheat 660.50 -4.50 -0.7% -15.1% CBOT rice 1539.00 11.00 0.7% 3.6% EU wheat 194.00 -0.50 -0.3% -22.5% US crude 107.97 1.49 1.4% 17.6% Dow Jones 15,561 90 0.6% 18.7% Gold 1286.40 11.01 0.9% -23.2% Euro/dollar 1.3099 -0.0025 -0.2% -0.7% Dollar Index 82.8480 0.1400 0.2% 3.9% Baltic Freight 1146 -5 -0.4% 63.9% (Additional reporting by Sam Nelson; Editing by Grant McCool, Jim Marshall and Bob Burgdorfer)

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