U.S. wheat sinks on global supply; corn/soy choppy

CHICAGO (Reuters) - U.S. wheat prices dived 3 percent by late morning Wednesday on outlooks for more wheat to move into global marketing channels, traders said.

The U.S. Agriculture Department is forecasting that the world wheat producers will harvest their largest crop in history -- more than 670 million tonnes, up nearly 10 percent from 2007/08. That outlook is beginning to have more of an impact on prices.

Additionally, leading wheat exporters Australia and Argentina were expected to benefit from much-needed rains for their crops.

"Record global wheat production is starting to materialize and people are starting to wonder why wheat is still at $8," Terry Reilly, an analyst with Citigroup, said.

On the Chicago Board of Trade, the September wheat contract WU8 was down 26 cents at $8.04-1/2 a bushel by the midsession.

Kansas City and Minneapolis wheat prices were also tumbling, with the nearby contracts down roughly 25 cents a bushel.

A bountiful corn harvest in the United States is looming, with both farmers and grain elevators trying to move freshly harvested wheat supplies into the market, thus freeing up valuable storage space for corn.

"That is pressuring the basis levels, the cash markets, which is pulling futures with it. The closer we get to the corn harvest, the more pressure there likely will be on wheat prices," said Gavin Maguire, an analyst with EHedger, a brokerage firm based in Chicago.

Trading was choppy in both corn and soybeans -- underpinned by weakness in the dollar and strength in crude oil.

But the sell-off in wheat, combined with outlooks for a few more showers across the Midwest crop belt this week, were weighing on prices.

New-crop December corn was down 3 cents at $5.91 a bushel, while new-crop November soybeans were 2 cents lower at $13.42-1/2 per bushel.

"We are essentially trapped in a trading range until we know more about the state of both corn and bean crops," Maguire said.

(Additional reporting by Sam Nelson in Chicago, Naveen Thukral in Singapore and Valerie Parent in Paris; Editing by Walter Bagley)