US Grain Exports-Weak dollar's support tempered by high prices

* Lower dollar supportive to near term export sales

* Futures rally dampens longer-term export prospects

* U.S. grains, soy costlier than other countries'

By Karl Plume

CHICAGO, March 19 (Reuters) - A plunging dollar may offer a slight near-term boost to U.S. grain export sales, but any uptick in sales will likely be short-lived as U.S. supplies remain among the highest priced in the global market, U.S. traders and analysts said on Thursday.

Meanwhile, a rally in grain and soybean prices, set off by a drop in the U.S. dollar following a bold move by the Federal Reserve to buy $300 billion worth of Treasury debt, will likely dampen longer term export prospects, they said.

"I don't see a major shift in the U.S. export campaign given just two days of weakness in the dollar," said Terry Reilly, grains analyst with Citigroup.

"You could see a slight increase in sales. Some countries might be coming in and hedging, thinking the prices may be here to stay. But that doesn't make them committed because they can easily cancel those sales and retender."

The dollar plunged for a second consecutive day on Thursday, a day after the Fed said it will purchase long-dated Treasuries over the next six months, its first large-scale purchases of government debt since the early 1960s. [ID:nN19429129]

The latest grain export sales figures released by the U.S. Agriculture Department on Thursday were below trade expectations as rising prices appeared to chill demand.

"The numbers were disappointing but it wasn't too surprising because prices were rallying last week and end-users didn't want to chase the market," said Shawn McCambridge, analyst for Prudential Bache Commodities.

USDA put corn export sales last week at a smaller-than-expected 440,000 tonnes, a 60 percent decline from the previous week. Japan was the top buyer with 276,800 tonnes, followed by Taiwan and Saudi Arabia with smaller amounts.

Wheat export sales for the current and new marketing years totaled 235,800 tonnes, also below expectations and down 41 percent from a week earlier.

The higher cost of U.S. corn and wheat versus other suppliers has hurt exports, while an increase in ocean freight since the start of the year has some overseas buyers sourcing some grain more locally.

"We're at or near the most expensive in the world for wheat," Reilly said.

"For corn, the slight rise in the Baltic dry index has made other major exporters a little bit more competitive against the U.S. We're seeing traditional buyers turn to nearby countries rather than stretch all the way to the U.S. to buy corn," he said, referring to the key ocean freight index .BADI.

SOYBEAN EXPORTS DOWN

Soybean sales last week also were lower than anticipated and were expected to generally decrease in the weeks and months ahead as more freshly harvested South American supplies enter the market, traders said.

But uncertainty about Argentine exports amid tensions between farm groups and the government over export taxes may benefit U.S. exports somewhat.

Ruling party lawmakers in Argentina refused on Thursday to debate a bill to cut soy taxes, raising the specter of fresh protests. [ID:nN19416362]

Soybean export sales totaled 339,800 tonnes in the latest week, far below trade expectations for 500,000 to 700,000 tonnes. Sales of 2008/09 marketing year soy were a marketing year low 143,300 tonnes. China was by far the biggest customer with 192,000 tonnes in new crop purchases. (Reporting by Karl Plume; editing by Jim Marshall)