GRAINS-Wheat set for weekly gain as US Plains drought hits crops

LONDON/CANBERRA, May 1 (Reuters) - Chicago wheat futures eased slightly on Friday but were still on track for a third straight weekly gain after dry conditions damaged crops in the U.S. Plains.

Corn and soybean futures were higher, supported by fears that a sharp rise in fertiliser costs due to the Iran war will crimp farm output over time.

The most-traded wheat contract on the Chicago Board of Trade Wv1 was down 0.3% at $6.34-3/4 a bushel at 0931 GMT but was headed for a 2.9% weekly rise.

The contract rocketed to $6.71-1/2 on Wednesday, its highest since June 2024, but shed 35 cents by Thursday's close, with large amounts of speculative money washing in and out again, according to traders.

Forecasts for rain in the U.S. Plains helped trigger the pullback. However, analysts said U.S. crops have already suffered yield losses, keeping upward pressure on prices.

"Rain would be enough to stop the rot, but not to recover," said Tobin Gorey, founder of consultants Cornucopia. "Yields are still declining," he said.

Meanwhile, the Strait of Hormuz remains closed, shutting off a chunk of the world's fertiliser and fuel supply. Iran on Thursday threatened "long and painful strikes" on U.S. positions if Washington renewed attacks.

"Nervousness about the issue of fertiliser has seen short positions taken off," Gorey said. "That's helped the market rally."

In the near term, global wheat supplies remain plentiful, and Northern Hemisphere harvests are approaching.

The European Commission cut its estimates for EU exports this season and next on Thursday, but consultants Sovecon raised their forecasts for Russian shipments.

The condition of French cereal crops worsened from the previous week, data from FranceAgriMer showed, though crops were in better shape than a year earlier, with 81% rated good or excellent.

CBOT corn Cv1 rose 0.4% to $4.76-3/4 a bushel and soybeans Sv1 climbed 0.5% to $12.01-3/4.