GRAINS-Nearby corn, soy gain on thin stocks; harvest hits wheat

* Spot corn up for second straight day, soy up for third day
    * Deferred contracts fall on favorable crop weather
    * Wheat down for fifth straight session as harvest weighs
    * Traders squaring positions ahead of Friday USDA reports

 (Recasts with deferred corn contracts turning lower, adds
details, quote, updates with closing prices)
    By Karl Plume
    CHICAGO, June 26 (Reuters) - Nearby U.S. corn futures rose
for a second straight session on Wednesday and spot soybean
futures climbed for a third day as traders adjusted positions
before an end-of-week U.S. Department of Agriculture report that
was expected to confirm the tightest U.S. grain stocks in years. USDA will also update its U.S. acreage estimates on Friday, likely trimming an earlier corn seeding outlook while raising its view of soybean acres in a shift blamed on persistent planting delays this spring. "There's good strength in the front end of the market mainly because of tight cash supplies and the expectation that few or no deliveries will be made (against July futures) at the end of the week," Jefferies Bache analyst Shawn McCambridge said. Deferred corn and soybean contracts retreated as favorable weather around most of the Midwest has bolstered development of recently planted crops. Heavy rain caused localized flooding in a few areas on Wednesday, but it mostly enhanced soil moisture levels across the region that was battered by drought a year ago. "We're seeing some increased flooding in some areas but at the same time it is keeping soil moisture at adequate-to-surplus levels. The market tends not to get too excited about killing a crop with too much moisture," McCambridge said. Trading volumes were light as investors headed for the sidelines ahead of Friday's reports, which also fall at the end
of the week, month and quarter, a time when many in the market square their accounts. "The trade is starting to position themselves ahead of the reports on Friday. We expect it to remain very quiet until those reports are out," said Terry Reilly, a senior commodities analyst with Futures International. Chicago Board of Trade July corn gained 7-3/4 cents, or 1.2 percent, to $6.64-1/2 a bushel, and new-crop December slipped 1/2 cent to $5.44. The spot contract drew additional support from strong corn demand from ethanol producers who increased daily output by 12,000 barrels last week according to the U.S. Energy Information Administration. The ethanol grind rose to 885,000 barrels per day on average, the highest in three weeks and equal to the grind from the week ending May 31 that was the largest in nearly a year. CBOT July soybeans rose 9 cents, or 0.6 percent, to a near-two-week high of $15.34-1/4 a bushel. New-crop November fell 2-1/2 cents, or 0.2 percent, to $12.76 a bushel. CBOT wheat futures fell for a fifth consecutive session, hitting a nearly three-month low on continued talk of larger-than-expected yields from the advancing U.S. harvest. Kansas City Board of Trade wheat futures fell to a one-year low.
Wheat slipped despite reports of widespread damage to China's milling wheat crop, which could trigger heavier imports from the United States. CBOT July wheat shed 8-3/4 cents, or 1.3 percent, to $6.67 a bushel. KCBT July wheat dropped 10 cents, or 1.4 percent, to $6.94-1/4. Prices at 2:05 p.m. CDT (1905 GMT) LAST NET PCT YTD CHG CHG CHG CBOT corn 664.50 7.75 1.2% -4.8% CBOT soy 1534.25 9.00 0.6% 8.1% CBOT meal 463.30 4.50 1.0% 10.2% CBOT soyoil 46.63 -0.51 -1.1% -5.1% CBOT wheat 667.00 -8.75 -1.3% -14.3% CBOT rice 1564.50 7.50 0.5% 5.3% EU wheat 197.25 0.50 0.3% -21.2% US crude 95.61 0.29 0.3% 4.1% Dow Jones 14,932 172 1.2% 14.0% Gold 1226.34 -50.40 -3.9% -26.8% Euro/dollar 1.3008 -0.0074 -0.6% -1.4% Dollar Index 82.9370 0.3560 0.4% 4.0% Baltic Freight 1125 35 3.2% 60.9% (Additional reporting by Michael Hirtzer in Chicago; Editing by Chris Reese and Jim Marshall)

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