* Soybean traders eye hot weather ahead in Midwest
* Weather worries overshadow USDA crop report (Adds closing prices, analyst comments, USDA report)
By Tom Polansek
CHICAGO, July 12 (Reuters) - U.S. grain futures rose on Tuesday, with soybeans touching a one-week high, on worries that a heat wave may threaten crops later this summer.
Concerns about the risk of damaging weather overshadowed a new report from the U.S. Department of Agriculture, which predicted a big domestic soybean harvest will help offset rising overseas demand for U.S. supplies of the oilseed.
Traders grew worried about stressful crop conditions as forecasters said above-normal temperatures and near-normal to below-normal rainfall may spread across most of the United States next week.
“Approximately five minutes after today’s report, traders switched their focus to weather,” said Angie Setzer, vice president of grain for agriculture retailer Citizens LLC. “Extended forecasts continue to point toward potentially record-setting heat entering the Western Corn Belt.”
Most-active November soybean futures, which represent the crop that farmers will harvest this autumn, climbed 32 cents to $10.87 a bushel at the Chicago Board of Trade.
The most actively traded December corn contract advanced 4-3/4 cents to $3.60-1/4 a bushel, while September wheat gained 8 cents $4.38-1/2 a bushel.
The sector has already had a roller coaster year. In January, grain prices careened toward multi-year lows as the U.S. dollar reached a demand-dampening 12-year high against other currencies.
By early June, soybean futures approached a two-year high on concerns about poor weather hurting output in South America, which competes with the United States for export business. But on Friday, the market touched a one-month low, 15 percent below its peak from a month earlier, partly because of favorable U.S. weather.
The recent setback makes soybean futures more susceptible to rallies based on concerns that heat and dryness may emerge, traders said. There is “lots of growing season ahead for (the) U.S. that may contain brief bouts of adverse weather,” said Rich Feltes, head of market insights for broker R.J. O‘Brien.
Mostly favorable weather so far this year led the USDA, in its crop report, to project the average U.S. corn yield this year will reach 168 bushels per acre, its biggest estimate ever for July.
The agency is likely to boost the already massive yield forecast in the coming months, according to historical data that show estimates of big crops tend to grow even larger as harvest time nears. (Additional reporting by Naveen Thukral in Singapore and Gus Trompiz in Paris; Editing by David Gregorio and Sandra Maler)