U.S. corn futures rose to a two-week high on Thursday in anticipation of crop reports expected to show drops in U.S. production and global inventories.

Soybeans, however, fell on expectations that a large harvest in South America will pinch demand for the U.S. crop.

Traders were evening up positions in the markets ahead of U.S. Department of Agriculture reports due out at 11 a.m. CST on Friday that are likely to spark sharp price swings.

USDA will issue a slew of data on global supply and demand, U.S. corn and soy production, quarterly U.S. grain inventories and U.S. winter wheat plantings.

"Nothing of importance happens until 11 a.m." on Friday, said Rich Feltes, vice president of research for RJ O’Brien, in a note.

Chicago Board of Trade (CBOT) corn for March delivery rose 4-1/2 cents, or 0.7 per cent, to $6.98-3/4 a bushel. March soybeans dropped 5-3/4 cents, or 0.4 per cent, to $13.79-3/4.

Corn has rebounded from a six-month low hit last week as traders have bought back some previously sold positions in the run-up to Friday’s reports.

In its final report on 2012 U.S. crop production, USDA is expected to estimate last year’s drought-hit corn crop at a six-year low.

Corn has swung by the maximum daily trading limit for six years in a row on the day of the department’s January announcements.

Drought drags on

But the severe U.S. drought stressing winter wheat is more important for wheat prices over the long term than Friday’s USDA estimates for winter wheat seedings, analysts said.

CBOT March wheat slipped one cent, or 0.1 per cent, to $7.44-1/2.

Roughly 60.26 percent of the contiguous United States was in at least "moderate" drought as of Jan. 8, a slight improvement from 61.09 percent a week earlier, according to a "Drought Monitor" report issued Thursday by a consortium of federal and state climatology experts.

Severe drought still blanketed 86.2 per cent of the High Plains, unchanged from the week before, while 60.25 per cent of the region was classified in extreme drought.

In its first disaster declaration of the new year, USDA on Wednesday made growers in large portions of four major wheat-growing states — Kansas, Colorado, Oklahoma and Texas — eligible for low-interest emergency loans.

Demand nibbling

Egypt, the world’s biggest importer of wheat, bought 55,000 tonnes of U.S. wheat and 60,000 tonnes of Canadian wheat in a tender for shipment Feb. 20-28. The purchases were seen as small and not supportive to prices.

Private exporters reported three soybean sales totaling 587,500 tonnes to top importer China and unknown destinations, with 246,000 tonnes for delivery in the next marketing year, according to USDA.

USDA separately said soybean and wheat sales last week fell to nine-week lows of 406,800 tonnes and 233,800 tonnes, respectively. Corn sales of 1,000 tonnes last week were a 15-week low.

The United States faces increasing competition for export business from Brazil, which is expected to harvest a record crop in the coming months.

— Tom Polansek covers agriculture and the CBOT for Reuters from Chicago. Additional reporting for Reuters by Gus Trompiz in Paris and Naveen Thukral in Singapore.