GRAINS-Soybeans slide on China trade war anxiety, wheat retreats

By Karl Plume

CHICAGO, Aug 3 (Reuters) - U.S. soybean futures drifted lower on Friday on worries about an escalating trade war between the United States and China after the world's top soy importer proposed more tariffs on U.S. goods.

Wheat futures slipped from earlier highs as traders cashed in profits following weekly gains of nearly 6 percent amid concerns about weather-reduced harvests in Europe and the Black Sea region.

Corn firmed on solid export demand and expectations that hot, dry weather in the U.S. Midwest may limit yield potential.

China proposed retaliatory tariffs on $60 billion worth of U.S. goods on Friday, casting doubt on prospects of talks with Washington to solve their bitter trade conflict.

Hopes for a restart in trade talks had lifted soybeans to six-week highs this week.

"This shows us that this trade war with China is not going to be resolved any time soon, and that's just negative to soybeans," said Karl Setzer, analyst with MaxYield Cooperative.

Chicago Board of Trade November soybeans fell 1-3/4 cents to $8.95-3/4 per bushel at 12:27 p.m. CDT (1727 GMT).

Grain markets remain on edge about crop-cutting weather around the world, with global wheat stocks seen shrinking amid the smallest world output in five years.

CBOT September wheat fell 4-1/2 cents to $5.56 a bushel after hitting its highest in three years for a most actively traded contract on Thursday.

The market rallied this week on speculation Ukraine would limit exports, though the government denied it planned to do so.

Searing heat has devastated wheat fields across northern Europe while dry conditions and extreme rain in the Black Sea have hit output estimates, with prices soaring on fears of further crop damage.

Corn futures gained about 1 percent as traders gauged crop conditions ahead of next week's monthly U.S. Department of Agriculture supply and demand report, the first monthly report of the season to include field surveys.

Analytical firm Informa Economics on Friday projected the average U.S. corn yield at 176 bushels per acre, below some forecasts that had been as high as 180 bpa or more.

"Good growing conditions had a lot of people thinking that USDA could be 179 or 180. That may not be the case," said Brian Hoops, president of Midwest Marketing Solutions.

CBOT September corn was up 3-1/2 cents at $3.70-1/4 a bushel. (Additional reporting by Colin Packham in Sydney and Sybille de La Hamaide in Paris; editing by David Evans and James Dalgleish)

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