CHICAGO U.S. wheat prices fell 1.5 percent on Friday as late-session profit-taking more than offset support from worries that a Black Sea region drought will leave a third of Russia's land fallow until next spring.
Soybean prices jumped 1.7 percent on brisk export demand and hot weather in the U.S. Delta that was stressing the crop in its key pod-setting stage of development. Corn advanced 1.4 percent.
"There was some profit-taking that took wheat down into the close. We had the bull numbers (in Thursday's monthly U.S. Agriculture Department report) and the good run-up, so people were just taking it off before the weekend," said ABN Amro broker Jeff Thompson, referring to the bullish world stocks and production data released by USDA.
Many traders wanted to lighten their load due to recent volatility in wheat prices, which soared to two-year highs last week before tumbling in four of the past six trading sessions. Prices were down 3.2 percent this week and down 16.5 percent from last week's highs.
A devastating drought has slashed wheat production in Russia. The country, which last year was the world's No. 3 exporter, has banned grain exports through at least the end of the year, fueling demand for wheat from the United States, Europe and elsewhere.
Drought and heat in parts of Russia and Ukraine are now expected to delay the sowing of winter grain crops, raising concerns that losses will extend to next year. Russia's winter crop sowing may drop by a third.
USDA on Thursday cut its 2010/11 Russian wheat export forecast by 80 percent and also scaled back for Ukraine and Kazakhstan.
The lower forecasts also follow floods in Pakistan and worries about too much rain on Canadian farms, all of which fueled a near doubling in U.S. wheat prices to a two-year high last week.
U.S. wheat prices were also pressured by spread activity, with traders selling wheat futures and buying corn after the typical $1 to $1.50 per bushel price spread between the two grains widened to more than $3 this week, traders said. The spot wheat/corn spread narrowed to $2.91 by the close Friday.
"The spread got pushed so wide that a lot of people are willing to take profits today on the wheat side and unwind some spreads," said Dax Wedemeyer, analyst and broker with U.S. Commodities.
Wheat for September delivery on the Chicago Board of Trade fell 10-1/2 cents to $7.02-1/2 a bushel after earlier trading as high as $7.24-3/4. Euronext benchmark November milling wheat rose 1.50 euros to 214.50 euros a tonne.
Wheat prices appear to have settled into a range of $6.90 to $7.30 and volume dropped nearly 50 percent on Friday as traders headed to the sidelines awaiting fresh news on the Black Sea crop.
Soybean prices rallied on Friday on continued strong export demand, mainly from the world's top importer China, and concern about potentially yield-reducing August heat in U.S. soy areas during the critical pod-setting phase of development.
The heat was leading to some concerns that soybean yields may be trimmed, which follows USDA's forecast on Thursday for a record large 2010 U.S. soybean crop.
Overly wet conditions could also impact soybean yield potential, a particular concern for Iowa, which was expecting another dose of rain this weekend after storms flooded some areas of the top U.S. soy state this week.
"Typically big crops get bigger, but with how variable the weather has been in the first part of August, the weather needs to get more favorable to bring those yields to fruition," a U.S. trader said.
September delivery soybeans rose 17-1/2 cents, or 1.7 percent, on Friday, slipping 1.5 percent in the week. Spot August soybeans rallied as much as 24 cents in very thin dealings but settled 5 cents lower at $10.52.
The August contract expired on Friday. The 22 contracts posted for delivery against that month on Friday were the first to surface and all of the soy was taken by commercial traders, another indication of good demand for soybeans.
CBOT September corn rose 5-1/2 cents, or 1.4 percent, to $4.11-3/4 per bushel, supported by robust demand for U.S. grains fed by lower feed grain production in the Black Sea region. The contract was up 1.7 percent on the week.
(Additional reporting by Naveen Thukral in Singapore, Svetlana Kovalyova in Milan, Sam Nelson in Chicago; Editing by Lisa Shumaker and David Gregorio)