GRAINS-U.S. wheat hits 2-month low as Plains harvest advances

* New-crop corn, soy ease; old-crop contracts jump
    * Weather in U.S. Midwest favorable for crop development
    * Goldman cuts corn, soybean price forecasts

 (Updates U.S. market activity to close, adds quotes)
    By Michael Hirtzer
    CHICAGO, June 14 (Reuters) - U.S. wheat futures settled at
the lowest level in more than two months on Friday as harvest
advanced in the southern Plains while new-crop corn and soybean
futures eased on ideal growing conditions for the young crops.
    Farmers were gathering hard red winter wheat in Texas and
Oklahoma, with harvest likely to begin soon in the top growing
state of Kansas. "Cutting is now in full swing from north Texas to the Kansas border," said Mark Hodges, director of the farmers group Plains Grains Inc. The increasing supply weighed on futures, with Chicago Board of Trade July wheat easing 4-3/4 cents to $6.80-3/4 per bushel, the lowest settlement since April 2. Wheat shed 2.3 percent for the week for the largest weekly decline since the week ending on April 26. Kansas City Board of Trade July wheat, the contract that reflects harvest of the HRW wheat crop, fell 7 cents to $7.11-3/4 per bushel, the lowest closing price in a year. "Wheat was down all day on anticipation of weekend harvest and perceptions of bigger world crops without an ensuing bigger demand," said Charlie Sernatinger, analyst at EDF Man Capital. Investors and users of the grain were eager to see the quality of the Plains crop after ongoing drought in the region stressed wheat plants. "When you have damaged wheat and a crop that's been through a lot of problems, you don't know what you've got until you actually harvest," said Sterling Smith, a market strategist at Citigroup. "This weakness in the market may be indicative that the
perception of the crop was worse than what we are actually harvesting." In the U.S. Corn Belt, growing conditions have turned ideal after record rains early this spring led to the slowest corn and soybean plantings in 17 years. The extended forecast shows occasional showers and warm temperatures, which should speed crop growth, agricultural meteorologists said. "Less extensive showers are expected by the third week of June, which will allow late plantings to resume and there is adequate moisture for crops," said Joel Widenor, meteorologist for Commodity Weather Group. "High temperatures will be in the upper 70s (Fahrenheit) to near 90 F, aiding growth rates." The good weather weighed on new-crop corn and soybean contracts even as the tightest stockpiles in at least nine years bolstered spot contracts in a bull-spreading bounce. Front-month CBOT July corn surged 1.8 percent, or 11-1/2 cents, to $6.55 per bushel, boosted by strong cash markets, while CBOT July soybeans gained 5-1/2 cents to $15.16-1/2. Still, corn lost nearly 2 percent for the week for the first weekly decline in a month. Soybeans eased 0.8 percent for the week, snapping a streak of six straight weeks of higher prices. Basis bids for spot barge loads of corn shipped to the U.S.
Gulf Coast surged to their highest-ever springtime level as short-bought exporters scrambled for near-term grain shipments, but supplies remained extremely tight. The gains in the nearby futures contracts helped limit pressure on new-crop contracts from good growing conditions. Corn for December delivery eased 4-1/4 cents to $5.31 while CBOT November soybeans edged 1/2 cent lower to $13.00. "Things are looking good for corn now as the planting is almost complete and weather forecasts look favorable for boosting yields," said Joyce Liu, an investment analyst at Phillip Futures in Singapore. RECORD PRODUCTION The corn market is also continuing to face pressure from estimates of record U.S. production. The U.S. Department of Agriculture in its monthly demand-and-supply report on Wednesday estimated the corn crop at 14.005 billion bushels, a billion bushels larger than the record set in 2009. Bumper crops would be a dramatic rebound from three years in a row of falling corn and soybean production, tightening stocks and sky-high prices. Corn stocks are headed to reach the lowest level in 17 years in 2012/13, with supplies set to be razor-thin until harvesting starts in the autumn. Goldman Sachs, in a report issued late Thursday, lowered its three-, six- and 12-month forecasts for corn and soybean prices for 2013 on an expected recovery in production and inventory. "We currently view the downside potential to agriculture prices as the largest opportunity across the commodity markets we cover," the investment bank said. Prices at 2:53 p.m. CDT (1953 GMT) LAST NET PCT YTD CHG CHG CHG CBOT corn 655.00 11.50 1.8% -6.2% CBOT soy 1516.50 5.25 0.4% 6.9% CBOT meal 450.70 -1.90 -0.4% 7.2% CBOT soyoil 48.48 0.64 1.3% -1.4% CBOT wheat 680.75 -4.75 -0.7% -12.5% CBOT rice 1650.50 -6.00 -0.4% 11.1% EU wheat 196.25 -1.50 -0.8% -21.6% US crude 97.80 1.11 1.2% 6.5% Dow Jones 15,076 -100 -0.7% 15.0% Gold 1389.79 4.35 0.3% -17.0% Euro/dollar 1.3345 -0.0028 -0.2% 1.1% Dollar Index 80.6500 -0.1020 -0.1% 1.1% Baltic Freight 900 27 3.1% 28.8% (Additional reporting by Sam Nelson in Chicago, Carey Gillam in Kansas City, Nigel Hunt and David Brough in London, and Naveen Thukral in Singapore; Editing by Dale Hudson and Kenneth Barry)

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