GRAINS-Soybeans sink nearly 4 pct; corn hits 2-1/2 year low

* Soy futures drop as cash basis bids tumble
    * Soymeal retreats from new contract high
    * Moderate temperatures, rain benefit pollinating corn

 (Recasts with soybean losses, adds closing prices)
    By Tom Polansek
    CHICAGO, July 23 (Reuters) - U.S. soybean futures tumbled on
Tuesday as cash basis bids weakened in key locations in the U.S.
Midwest and farmers sold some of their scarce old-crop supplies.
    Corn futures also came under pressure, with the new-crop
contract falling to its lowest level in more than 2-1/2 years as
forecasts for nearly ideal weather during the crop's key
	
development phase buoyed hopes for a record harvest. Soybeans suffered the steepest losses as a rally to 10-month highs on Monday sparked selling by farmers that temporarily eased tight supply in some areas, dealers said. Additional pressure stemmed from unconfirmed rumors that China, the world's top soy importer, may sell 3 million tonnes of the oilseed from government reserves, potentially reducing its demand for U.S. soybeans, they said. "It looks like the Gulf has all the beans they need for the time being," Mark Gold, managing partner for Top Third Ag Marketing, said about the Gulf of Mexico, the major export gateway for U.S. soy. Talk about China's reserves, "whether it is true or not, has really knocked the wind out of this thing," he said. Chicago Board of Trade August soybeans sank 3.8 percent to $14.62-1/2 a bushel, while new-crop November soybeans slid 2.2 percent to $12.60-1/4 a bushel. August soymeal dropped 2.9 percent to $487.80 per short tonne, pulling back from a contract high of $521. The contract on Monday climbed the daily, exchange-imposed trading limit of $20 as U.S. processors scrambled to find old-crop soy supplies to crush into meal. Soybean inventories are expected to reach a nine-year low by
Aug. 31 due to strong demand and a historic U.S. drought that reduced last year's harvests. CORN CRUMBLES Moderate temperatures and occasional light rain over the next week to 10 days will aid the corn crop in the U.S. Midwest and boost soybean growth, according to Global Weather Monitoring. The favorable conditions are arriving just as corn is starting to pollinate, the most important period of development for determining the size of the harvest. "It couldn't be better," Paul Butler, a farmer in Macon, Illinois, said about the weather. "We're getting perfect rains right where we need them." September corn fell 3.4 percent to $5.22-1/2 a bushel, and new-crop December corn fell 2.5 percent to $4.85-1/2. Food companies, ethanol producers and livestock producers hope a massive harvest will replenish inventories that are expected to drop to a 17-year low by Aug. 31. The outlook for beneficial weather overshadowed declining crop condition ratings and a sale of 106,400 tonnes of U.S. corn to Mexico, traders said. The USDA on Monday rated 63 percent of corn as good to excellent as of Sunday, down three percentage points from a week earlier, and 64 percent of soybeans as good to excellent, down one percentage point. Wheat futures edged lower, with the September contract dipping 0.6 percent to $6.53-3/4 a bushel.
Prices at 2:34 p.m. CDT (1934 GMT) LAST NET PCT YTD CHG CHG CHG CBOT corn 522.50 -18.25 -3.4% -25.2% CBOT soy 1462.50 -57.75 -3.8% 3.1% CBOT meal 487.80 -14.60 -2.9% 16.0% CBOT soyoil 44.78 -0.63 -1.4% -8.9% CBOT wheat 653.75 -6.00 -0.9% -16.0% CBOT rice 1577.00 36.50 2.4% 6.1% EU wheat 190.50 -2.00 -1.0% -23.9% US crude 107.27 0.33 0.3% 16.8% Dow Jones 15,591 46 0.3% 19.0% Gold 1343.21 8.17 0.6% -19.8% Euro/dollar 1.3226 0.0043 0.3% 0.2% Dollar Index 81.9870 -0.2320 -0.3% 2.8% Baltic Freight 1127 -8 -0.7% 61.2% * Paris futures prices in euros per tonne, London wheat in pounds per tonne and CBOT in cents per bushel. (Additional reporting by Julie Ingwersen in Chicago, Naveen Thukral in Singapore and Ivana Sekularac in Amsterdam; Editing by Marguerita Choy, John Wallace and Nick Zieminski)

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