Grain futures head for weekly declines

US grain futures fell on Friday, headed for weekly declines, as the lack of conclusive steps by euro zone leaders stoked fears the sovereign debt crisis is spreading to bigger economies including Germany.

France and Germany agreed on Thursday to stop arguing in public over whether the European Central Bank should do more to rescue the euro zone but this failed to assuage investor fears.

"Consumption of commodities will slow down as global growth falters," said Ang Kok Heng, who helps manage about $400 million as chief investment officer at Phillip Capital Management in Kuala Lumpur.

"It's more than just supply and demand dictating prices. The futures market is leading the cash market in terms of direction."

Chicago Board of Trade (CBOT) corn for December delivery fell 0.47 per cent to $5.86 per bushel by 0401 GMT. Prices were on track for a 3.9 per cent weekly drop, their third straight decline.

December wheat slipped 0.17 per cent to $5.78-1/4, set for a fourth straight week of losses.

Most-active January soybeans fell 0.56 per cent to $11.16-1/4 per bushel. This week's drop of 4.47 per cent is the biggest fall in five weeks.

Grains also fell after the International Grains Council on Thursday forecast a record global corn crop in 2011/12, even after cutting its forecast by 2 million tonnes to 853m. World corn production in 2010/11 was 826 million.

The council also lowered its forecast for global wheat production in 2011/12 by 1m tonnes to 683m, still well above the prior season's 653m.

The CBOT soybean January contract is still eyeing a bearish target of $11.02 per bushel, the 161.8 per cent Fibonacci projection level of a progressing downward wave "c", according to Reuters technical analyst, Wang Tao.

Traders have been focusing on demand because the US corn and soybean harvests are finished. Markets are waiting to see whether China will ramp up its purchases of corn with prices slipping below $6 per bushel. The last major purchase of US corn by China was when prices fell below that.

Estimates of harvests for the coming year were kept high as the weather was conducive for planting.

Southern Hemisphere prospects remain favourable, with rains in South America and Australia mostly boosting yield expectations for wheat and helpful for plantings of corn, the International Grains Council said in its report on Thursday.

Argentine farmers made quick progress in planting the 2011/2012 soy crop this week, thanks to moist soils after weeks of plentiful rain, the Buenos Aires Grains Exchange said.

Argentina is the world's No 3 soybean supplier. The US Department of Agriculture (USDA) sees this season's soy output at 52m tonnes, while the government sees up to 53m.

The European Union's cereals management committee voted on Thursday to extend the suspension of the bloc's import duties on feed wheat and barley until June 30, 2012, French farm office FranceAgriMer said in a note released after the meeting.

The Canadian Wheat Board projected lower wheat values on Thursday for the 2011-12 (Aug/July) marketing year.

The US Department of Agriculture will issue its weekly report on export sales on Friday, one day later than usual due to Thursday's Thanksgiving holiday.

The euro fell to a fresh seven-week low, carrying over its weakness triggered after German Chancellor Angela Merkel said the previous day she still does not think common euro zone bonds are necessary.