U.S. grains higher in volatile trade amid jitters

By K.T. Arasu

CHICAGO (Reuters) - U.S. grain prices were slightly higher at midday on Friday after a roller-coaster session that saw grains jump as oil surged to record highs, then fall on worries about two U.S. home financing giants, only to crawl back up again.

Corn, soybeans and wheat rose sharply when the opening bell rang at the Chicago Board of Trade, buoyed by oil's surge to a record high above $147 a barrel.

But grains soon fell, with the market spooked by a sell-off in the stock market triggered by fears home financing providers Freddie Mac (FRE.N) and Fannie Mae (FNM.N) might run short of capital.

"Most definitely," said grains analyst Don Roose, an analyst with U.S. Commodities, when asked about the link between CBOT grains losses and concerns over the companies.

"The stock market is reacting, down more than 200 points. There's no new buying in grains," he said, adding that index funds were among investors liquidating positions in grains.

Analysts said there was also profit-taking by some investors after corn and soybeans hitting record highs in recent weeks as the worst floods in the Midwest in 15 years damaged millions of acres of crops.

Corn rose to a record high $7.65 on June 27, up 133 percent from a year ago, while soybeans Sc1 surged past $16 a bushel to an all-time high of $16.63 on July 3, up 96 percent from a year earlier.

Analyst Bill Nelson of Wachovia Securities said there was "a little bit of a panic going on" with investors, in general, fearing the impact of a protracted financial crisis on the already sluggish economy.

MARKETS RETURN TO THE BLACK BY MIDDAY

By midday, corn, soybeans and wheat were higher. Helping the markets was the dollar's fall against major currencies that could help bolster exports.

CBOT September corn futures were up 2 cents at $6.88-1/2 a bushel at 12:17 p.m. CDT (1:17 p.m. EDT) after rising to a high of $6.97-1/2 and falling to a low of $6.77.

August soybeans were up 15 cents at $16.15-1/2 after a session high of $16.35 and low of $15.83.

September wheat rose 12 cents to $8.30 after a high of $8.46 and low of $8.12.

Before the market opened, the U.S. Department of Agriculture issued it's July supply/demand report, which was seen by analysts as being largely neutral to futures.

"It seems like these numbers have been pretty well anticipated. There's not a whole lot there to drive the market one way or another," said Jack Scoville of the Price Futures Group.