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UPDATE 1-USDA raises corn, wheat supply view; trims soybean stocks

(Adds analyst comments, details from USDA; soy, wheat price reaction)

By Mark Weinraub

CHICAGO, April 9 (Reuters) - The U.S. Agriculture Department on Tuesday raised its outlook for how much corn will be left in grain elevators ahead of harvest this year due to falling demand from the export, feed and residual and ethanol sectors.

The government also boosted its estimate of domestic wheat supplies. But it trimmed its outlook for soybean stocks for the third report in a row.

Corn stocks as of September 1 were forecast at 2.035 billion bushels, USDA said in its monthly supply and demand report, up from its March forecast of 1.835 billion bushels.

USDA said its 75 million-bushel cut to the corn export view stemmed from rising competition from Brazil, Argentina and Ukraine. Harvest outlooks were raised in Brazil, to 96 million tonnes, in Argentina, to 47 million tonnes, and in Ukraine, to 35.81 million tonnes.

Traders quickly shrugged off the bearish supply outlook.

"We knew the report was going to be bearish. It was," said Ted Seifried, chief agricultural market strategist with Zaner Group. "As we've been very heavy coming into this report, we're seeing a little bit of relief and a little bit of a bounce."

Soybean stocks were pegged at 895 million bushels as USDA bumped its estimate of the amount of soybeans that will be used for seed and trimmed its import projections. In March, it had estimated soy ending stocks of 900 million bushels.

The soybean stockpile was still expected to be the biggest on record and more than double the amount that was left over heading into the current marketing year.

Wheat ending stocks were seen at 1.087 billion bushels, up from the government's March forecast of 1.055 billion bushels, largely due to a cut of 20 million bushels to its export projections.

Analysts had been expecting corn stocks of 1.991 billion bushels, according to the average of estimates in a Reuters poll. The average of estimates was 898 million bushels for soybean stocks and 1.072 billion bushels for wheat stocks.

Chicago Board of Trade corn futures, which had been trading about 1 percent lower before the report was released, briefly dropped to their lowest since Nov. 26 but then turned higher as traders digested the government data.

Soybean futures were trading close to unchanged and wheat futures were weak.

(Additional reporting by Tom Polansek; editing by Diane Craft and Dan Grebler)

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