US wheat leads corn, soybeans sharply lower

* Forecast for rain in U.S. Plains pressures wheat prices

 * Corn, soy follow drop in wheat as crude comes off highs

 * Export inspections disappoint; demand for wheat dries up

 * Coming Up: Will benchmark wheat contract break below $8?
 

 By Mark Weinraub

 CHICAGO, March 7 (Reuters) - U.S. grain futures tumbled on
Monday as investors worried that surging oil prices may dent
demand, while forecasts for rain in drought-hit areas of the
southern Plains put additional pressure on wheat, which slid
3.5 percent.

 Wheat fell the most in about two weeks. Corn was down for
the second straight session, while soy fell for the fist time
in five sessions.

 Speculators, loaded with long positions in grains, were
still trimming these positions as crude oil prices retreated
from 2-1/2 year highs, traders said.

 "The markets are very nervous," said Greg Grow, director of
agribusiness for Archer Financial Services in Chicago. "It does
not take much. I think people are just very spooked right now
because of the events in the Middle East and trying to discern
what the implications are."

 The U.S. Agriculture Department reported wheat export
inspections of 21.44 million bushels on Monday, near the low
end of forecasts, which the trade viewed as evidence that
export demand for U.S. supplies would slow after a surge in
February.

 "End-users are well covered and I think the story that
China has plenty of wheat stockpiled had something to do with
it," said Paul Haugens said, vice-president for Newedge USA.

 At 10:50 a.m. CST (1650 GMT), the benchmark CBOT May soft
red winter wheat contract WK1 was down 29 cents at $8.03-1/4
a bushel. CBOT May corn CK1 was down 14-1/2 cents at
$7.13-1/2 a bushel and CBOT May soybeans SK1 were down 25-1/2
cents at $13.88-1/2 a bushel.

 China said over the weekend that it is holding 100 million
tonnes of wheat stocks, around the same amount as its annual
output, reiterating Beijing's resolve to keep grain prices in
check.

 Unrest in the Middle East had boosted world demand for
wheat during February but traders said the political upheaval,
could start to weigh on the world economic recovery.

 Troops loyal to Muammar Gaddafi launched counter-offensives
against rebel-held towns on Sunday, increasing fears that Libya
is heading for a civil war rather than the swift revolutions
seen in Tunisia and Egypt.

 Dry conditions have plagued the U.S. Plains since the hard
red winter wheat crop, which much of the world was counting on
to ease the tight supply situation, was planted last fall.

 "Some beneficial precipitation is expected for wheat over
northern Kansas, northeast Colorado and southwest Nebraska on
Tuesday," said Mike Palmerino, agricultural meteorologist with
Telvent DTN.
Prices at 11:00 a.m. CST (1700 GMT)                           

                          LAST      NET    PCT     YTD

                                    CHG    CHG     CHG
CBOT corn       Cc1      707.00   -14.25  -2.0%   12.4%
CBOT soy        Sc1     1381.25   -26.50  -1.9%   -0.9%
CBOT meal       SMc1     357.50    -6.30  -1.7%   -3.5%
CBOT soyoil     BOc1      58.23    -0.73  -1.2%    0.8%
CBOT wheat      Wc1      773.50   -27.00  -3.4%   -2.6%
CBOT rice       RRc1        .00     0.00   0.0% -100.0%
EU wheat        BL2H1    250.00    -3.00  -1.2%   -1.0%
US crude        CLc1     105.30     0.86   0.8%   15.2%
Dow Jones       .DJI     12,090      -80  -0.7%    4.4%
Gold            XAU=    1430.94    -1.01  -0.1%    0.8%
Euro/dollar     EUR=     1.3976  -0.0019  -0.1%    4.7%
Dollar Index    .DXY    76.4510   0.0510   0.1%   -3.3%
Baltic Freight  .BADI      1382       36   2.7%  -22.1%
 * Front-month contracts. CBOT contracts in U.S. cents per
bushel except soymeal in dollars per ton, soyoil in cents per
lb and rice in cents per hundredweight. Paris wheat in euros
per tonne and London wheat in pounds per tonne.
(Source: http://af.reuters.com/article/commoditiesNews/idAFNL3E7E704F20110307)