* Crop, yield cuts for corn less than expected
* Soybeans rise on cuts to crop, yield
* Soy futures daily gain most in two weeks (Adds wheat tender by Egypt, analyst comments, updates with closing prices)
By K.T. Arasu and Tom Polansek
CHICAGO, Sept 12 (Reuters) - U.S. corn futures tumbled 1 percent to close at a two-month low on Wednesday as the U.S. government's monthly assessment of crop damage from the worst drought in half a century fell short of trade expectations, as did its estimate of buffer stocks.
Soybean futures soared 2.6 percent for the biggest daily gain in about two weeks and snapped a five-day losing streak after the U.S. Department of Agriculture cut its estimate of the crop in the world's top grain-exporting nation.
The department also cut its yield estimate for soybeans, pouring cold water on some trade expectations for an improvement after rains last month in the northern and eastern Midwestern farm belt.
USDA reduced its estimate of corn used for feed in the just-ended 2011/12 marketing year (September-August) by 150 million bushels. Corn exports have tumbled in recent weeks as end-users turn to other suppliers and alternative feed.
The department pegged corn ending stocks next summer at 733 million bushels, above trade estimates for 592 million bushels.
Soybeans were on track to test the record $17.94-3/4 per bushel hit last week by the spot month. Traders said even higher prices were needed to temper demand, with the stocks-to-use ratio set to be the lowest in nearly five decades.
"Soybeans are like the sleeping giant. Prices are high but so many things are still unknown," said Brandon Kliethermes, a senior economist with His Global Insight agricultural service.
"It's still a guessing game for soybean yields, unlike corn which is being harvested," he said, alluding to the potential for corn yields in some parts of the Midwest to be good.
Demand for corn, on the other hand, has diminished sharply after prices hit an all-time high of $8.49 per bushel on August 10. U.S. livestock producers, particularly hog farmers, are rushing to slaughter their animals due to record feed costs and pasture damage from the drought.
"Corn numbers show we were rationing demand pretty aggressively in the old crop," said Don Roose, president of U.S. Commodities in West Des Moines, Iowa.
"Soybeans could not do a good job of rationing demand. If you can't ration demand when prices are high, you can't ration demand with lower prices," Roose said.
CBOT new-crop December corn fell 1.0 percent to close at $7.69-1/2 a bushel. November soybeans rose 2.6 percent to close at $17.45-3/4 a bushel after falling to a three-week low on Tuesday. December wheat rose 0.7 percent to $8.90.
Wheat futures could get some price direction from a wheat tender by Egypt's main state-run buyer, the General Authority for Supply Commodities, that is due on Thursday.
It was the seventh tender in about a month by the world's largest wheat importer that has been sent scrambling for supplies amid drought cutting the Russian crop and dry weather trimming the crop in Australia.
With the soybean harvest at least five months away in agricultural powerhouses Brazil and Argentina -- the world's second and third largest exporters after the United States -- traders said America remains the sole supplier to the world.
Traders said risk premiums were being built into CBOT soybean futures in case of any production problems in South America, which was hit by a drought last year.
"Bottom line is soybeans have more fundamental support than corn in today's trade," Commodity Trading Advisor Karl Setzer of MaxYield Cooperative said in a note to clients.
"Hopes in South America are new crop soybeans will be available for harvest by January. This could put them in the global market by late February, about the same time the U.S. inventory becomes depleted on exportable reserves," he said.
USDA's closely watched monthly supply-demand report estimated this year's corn harvest at 10.727 billion bushels, down slightly from last month's 10.779 billion estimate but above the analysts' average estimate of 10.38 billion.
It would be the smallest crop in six years, with the lowest yield in 17 years at 122.8 bushels per acre.
Analysts were surprised that the USDA did not cut its estimate of corn's harvested acres for this year, which at 87.36 million was above trade expectations for 86.2 million.
A decline in harvested acres had been expected following random field inspections that showed severe drought damage. Some of the surveyed corn hardly had any kernels, making it worthless for harvest.
"The harvested-acre number surprised me," said grain analyst Ken Smithmier of The Hightower Report.
The USDA pegged the soybean harvest at 2.634 billion bushels, down from last month's 2.692 billion and below the analysts' average estimate of 2.657 billion. Ending stocks next summer were projected to be the lowest in nine years at 115 million, unchanged from August's estimate.
"Clearly it was bullish beans and bearish corn," Charlie Sernatinger of ABN AMRO in Chicago said about the report. (Additional reporting by Julie Ingwersen; Editing by Keiron Henderson, Maureen Bavdek, Lisa Von Ahn and Bob Burgdorfer)