By Mark Weinraub
CHICAGO (Reuters) – Soybean futures rose 3 percent at the Chicago Board of Trade Friday, touching their highest level in more than three weeks, due to a government forecast that predicted supplies would be tighter than expected, traders said.

The U.S. Agriculture Department’s October crop report also forecast soybean production below analysts’ estimates.

“We are breaking the mold here a little bit with the crop report,” said Rich Feltes, director of MF Global Research in Chicago. “Typically cool, wet summers have given you fairly big jumps in October corn and soybean yields and it did not happen today.”

Forecasts for cold and wet weather causing further delays to harvest around the U.S. Midwest also contributed to the bullish tone supporting the soybean market.

CBOT November soybean futures settled up 28 cents at $9.64 a bushel after rallying as high as $9.68 a bushel earlier in the session.

CBOT December corn closed 1-3/4 cents lower at $3.62-1/4 a bushel as traders locked in profits from market gains earlier in the week.

Wheat futures also fell, with the December contract ending 6 cents lower at $4.68 a bushel, a 1.3 percent drop.

For the week, soybean futures rose 8.9 percent while corn futures were up 8.6 percent. Wheat futures gained 6.1 percent during the week.

WEATHER FORECASTS IN FOCUS

The weather outlook could lend strength to the corn and soy markets during the next few weeks despite predictions of bumper harvests for both crops.

“It looks like its going to be a wet crop, slow to harvest, and that could be the key,” said Don Roose, analyst for U.S. Commodities in West Des Moines, Iowa. “That could support (prices if the market) breaks.”

U.S. farmers are expected to harvest a record soybean crop this year and the second biggest corn crop,

USDA, in its October crop report, pegged this year’s soybean crop at 3.250 billion bushels, above the government’s previous forecast of 3.245 billion bushels but below the average trade estimate for 3.281 billion bushels.

The government also raised its forecast for corn production to 13.018 billion bushels from its earlier estimate of 12.954 million. Analysts had been expecting corn production of 12.986 billion bushels.

USDA predicted soybean ending stocks of 230 million bushels for the 2009/10 crop year, 7.6 percent below the average analyst forecast of 249 million bushels.

Wheat futures were under pressure from expectations for abundant supplies during the next year.

USDA said early Friday it expected 2009/10 U.S. wheat ending stocks at 864 million bushels, topping analysts’ estimates for 802 million and above the USDA forecast in September for 743 million.

Corn and soybeans were planted late this year because of a wet spring. The late seedings combined with a cool summer to slow crop maturity. But the damp growing conditions also led to forecasts for a record soybean crop and a near-record corn crop.

Freezing temperatures arrive in the western reaches of the U.S. Corn Belt Friday morning and rainy weather hit parts of the eastern Midwest. The low temperatures will likely end the growing season for crops in the western areas.

More cold weather was expected during the weekend, which could lower harvest yields in areas where crops were still immature.

“I’m still under the impression that grain prices should be cheaper but there’s been some weather-related concerns,” said David Watson, senior risk manager at FCStone Australia. (Additional reporting by Bruce Hextall in Sydney; Editing by David Gregorio)

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