UPDATE 2-US grains rally as funds buy, crop data ignored: By Sam Nelson CHICAGO, Feb 9 (Reuters) - Funds turned the tables on bearish government crop data to drive U.S. grain and oilseed markets sharply higher on Thursday, with the prospect of a large wheat sale to Iraq adding support, traders said. Traders and analysts were uncertain how prices would trend when the Chicago Board of Trade opened for business amid a conflict between the U.S. Agriculture Department's raft of mostly bearish data and the prospect of investment fund buying. "The funds were buyers and once again people were just afraid to step in front of that group of traders," said Dale Gustafson, analyst for Citigroup. "I'm not surprised," said Charlie Sernatinger, analyst for O'Connor and Co. "Too many people were short around here and they were pooh-poohing the market. The talk was that Goldman had more stuff to allocate on the close." There was widespread talk early in the week that a Goldman Sachs fund was going to purchase large amounts of wheat, corn and soybean futures. Funds bought roughly 15 million bushels of wheat, 30 million bushels of corn and 25 million bushels of soybeans, traders said. CBOT wheat and corn prices climbed 2 percent and soybeans over 1-1/2 percent in spirited trading and heavy volume. CBOT March wheat rose 6-1/2 cents to $3.63-1/4 per bushel, March soybeans rose 9-3/4 cents to $5.87-3/4 and March corn was up 4-1/4 cents at $2.25-1/2. Farmers took the opportunity to sell grain and oilseeds in the cash markets, briefly paring the gains in CBOT futures. The markets also got a boost from sharp gains in the U.S. precious metals and crude oil markets. Traders said expectations for a large wheat sale to Iraq were helping to keep the bullish momentum in wheat futures, which hit contract highs at the Kansas City Board of Trade. Kansas City trades the class of wheat that is preferred by Iraq, which has emerged as a top market for U.S. wheat. Investment funds have been buying CBOT grain futures based on the perception that grains are cheap relative to soaring inflation-sensitive commodities such as crude oil, gold, silver and other metals. Investors also have been favoring the corn market amid a booming ethanol fuel industry that depends on corn and sugar to keep its engines running. USDA on Thursday issued a reminder that the stockpiles of grain and oilseeds remain cumbersome. USDA forecast 2005/06 marketing year ending stocks of U.S. corn at 2.401 billion bushels, above an average of analysts' estimates for 2.389 billion, well above last year's 2.112 billion, and sharply above the drought-reduced stockpile two years ago of 958 million. The corn and soy marketing year ends on Aug. 31 and the wheat marketing year will end on May 31. USDA pegged U.S. soy ending stocks at a record large 555 million bushels, above estimates for 534 million and above the USDA's forecast in January for 505 million. Back-to-back bumper soy and corn crops in the United States and surging soy output in South America have added to the bin-busting stockpiles. U.S. wheat ending stocks at 542 million bushels were above the average estimate for 536 million and unchanged from USDA's forecast in January. Traders said most wheat fundamentals were neutral to bearish for the market, but fund buying and a drought in the U.S. Plains hard red winter wheat region has been supportive. END
