Soy falls 1 pct, China move raises demand fears

* China central bank move weighs on commodity complex

* Corn sets new peak early, fundamentals still supportive

* Profit-taking seen ahead of long weekend

(Recasts, updates with U.S. trading, fresh analysts' comments, previous dateline LONDON)

By Rod Nickel

WINNIPEG, Manitoba, Feb 18 (Reuters) - Soybeans fell on Friday, heading for their third weekly loss in four weeks, after the world's biggest soybean buyer, China, moved to curb inflation, raising concerns about demand.

Wheat also slipped on profit-taking and fears that China's monetary tightening would cut demand after it raised lenders' reserve requirements to tackle inflation, but prices were well above their overnight lows. Corn turned off earlier losses on stronger crude oil prices.

Wheat was headed for a 2.6 percent weekly loss, its biggest in nearly three months, while corn moved toward its third straight weekly gain.

Talk that China bought four cargoes of soy from Brazil further weakened U.S. soybean futures, along with profit-taking ahead of markets closing for U.S. Presidents Day on Monday.

"We had (soybean sale) cancellations again this week and then more economic restrictions, so kind of dual negative news on China," said Bill Nelson, oilseed analyst at Doane Advisory Services in St. Louis, Missouri.

Improving crop prospects in Brazil, which may see record soybean production in 2011, overhang prices, Nelson said.

"It's become a bit of a wait on this market."

Chicago Board of Trade soybeans for March delivery fell 15 cents, or 1.1 percent, to $13.89-1/2 a bushel as of 10:08 a.m. CST (1608 GMT), losing some of the ground gained on Thursday when prices surged nearly 3 percent on hopes that China would cut its import duties on soybeans and soyoil.

Nearby soybeans were on pace for a 1.9 percent weekly drop, the biggest in six weeks.

Crude oil futures rose over 1 percent, however, offering potential spillover support to corn and soybeans through its influence on the biofuels market.

"We got beat up because of the Chinese rate increase. Now we'll see if everything can come back since crude oil turned up," said Matt Pierce, analyst for GrainAnalyst.com.

WHEAT SLIPS, BUT CHINA DROUGHT STILL KEY

Profit-taking and China's anti-inflation move also weighed down wheat and corn, although those crops and soybeans all pared losses from European trading hours.

CBOT wheat for March delivery slipped 6-1/2 cents, or 0.8 percent, to $8.44-1/4 a bushel.

Prices have now fallen back around 5.5 percent from a peak of $8.93-1/4 set last week, which was the highest level for the front month in about 2-1/2 years.

Wheat remains underpinned by drought hitting China's winter wheat crop, although snow this week has brought relief to some areas.

"Fundamentals haven't changed - we haven't found any more wheat," UK merchant Gleadell Agriculture said in a market note.

China's drought is still affecting 6.7 million hectares (16.6 million acres) in eight provinces, Xinhua news agency quoted Water Resources Minister Chen Lei as saying.

In Paris, milling wheat futures for March delivery were up 0.25 euros to 264.25 euros a tonne.

Chicago Board of Trade corn for March delivery rose to an early peak of $7.14-3/4 a bushel, the highest level for the front month in more than 2-1/2 years but then slipped back to $7.11-1/2, off 1-1/4 cents or 0.2 percent.

Corn remained on course for a slight weekly gain of 0.7 percent.

"The trend is up," said Don Roose, president and analyst at U.S. Commodities in West Des Moines, Iowa. "We have contract highs to end the week here, there are no signs of rationing. You get these quick little setbacks but they are very short-lived."

Dealers said the fundamental outlook for corn remained strong, with stocks in the United States, the world's largest supplier, seen falling to a 15-year low this summer.

(Source: http://www.forexyard.com/en/news/GRAINS-Soy-falls-1-pct-China-move-raises-demand-fears-2011-02-18T165102Z)