Light showers fell in the Midwest overnight, providing some relief to the corn and soybean crops, but a Tropical Depression in the Caribbean Sea earlier seen bringing rain to the Midwest in about 10 days was now forecast to veer into Mexico.
Analysts said attention was also turning to the demand side of the equation for evidence that this summer's record high prices had significantly reduced sales of corn and soybeans to various end-users, including export markets
The U.S. government's weekly grains export sales report on Thursday provided fresh evidence that importers were turning away from the world's top grain supplier.
Sales of U.S. soybeans to foreign markets last week came to the smallest total in nine months, according to the U.S. Department of Agriculture, while corn sales were 70 percent smaller than a year earlier.
"The market is losing some of its bullish enthusiasm," said grains analyst Bill Nelson of Doane Agricultural Services in St. Louis, Missouri, wondering whether prices had peaked.
The corn and soybean crops' condition ratings are the worst since the last major drought in 1988.
CAUTION AHEAD OF AUG. 10 USDA REPORT
Analysts said there was caution in the market ahead of the USDA's supply-demand report on Aug. 10 that could further cut the government's yield and production estimates for U.S. corn and soybeans while revising down its demand forecasts.
Some also expect the USDA to slash its estimate of the number of acres of corn that will be harvested due to severe damage from the drought that covers about two-thirds of the contiguous United States.
Traders said market sentiment could turn bearish if the USDA's downward revisions fall far short of trade expectations, although the department is known for its step-by-step revision to its estimates so as not to gyrate markets
Closely watched agronomist Michael Cordonnier of Soybeans and Corn Advisor consultancy in Hinsdale, Illinois, said he was expecting 83 million acres of corn to be harvested, compared with the USDA's current estimate of 88.9 million.
He expects farmers to abandon some of their fields due to severe damage from the drought and also harvest a larger portion than usual for silage due to poor yields.
"They are going to plow it under and move on," he said, of fields in too poor a condition to be harvested.
There are also analysts who feel grain prices are in a corrective phase after their drought surge, with corn up about 50 percent and soybeans 20 percent since the rally began about six weeks ago.
"There's nothing in the fundamentals that changes the bullish view we've had for the past month. If anything, the outlook's getting worse with U.S. corn yields decreasing, Russia's wheat production decreasing and it's dry in Western Australia," said James Dunsterville, head analyst with Geneva-based consultancy Agrinews.
"On the other hand a market can't continually go up. It has to see corrections, to allow people to take profits."
Chicago Board of Trade new-crop December corn fell 0.3 percent to $7.97-3/4 per bushel, off a session low of $7.85-1/4, by 1734 GMT. November soy fell 0.4 percent to $16.22 a bushel, off the day's low of $15.95.
September wheat dipped 0.9 percent to $8.72 a bushel, off the session low of $8.56.
Wheat had been taking additional pressure from a declaration by Russia that it had no plan to curb exports despite a poor harvest due to inclement weather.
Russia revised up its wheat production estimate to 50 million tonnes with an exportable surplus in the range of 11 million to 15 million tonnes in 2012/13, a government source told Reuters on Wednesday.
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