U.S. corn supply seen larger, soy stocks shrinking

* Corn stocks seen up 2 pct from year ago on demand drop

* Soybean stocks down 7.5 pct on good exports

* Wheat stocks up on slow exports amid big global supply

By Karl Plume

CHICAGO, March 27 (Reuters) - Reduced demand from livestock and poultry producers and overseas buyers led to a larger U.S. stockpile of corn compared with last year, analysts said ahead of the U.S. Agriculture Department’s quarterly grain stocks report.

Wheat stocks were expected to be larger because of a sharp drop in exports, but soybean stocks were likely smaller due to strong demand for U.S. supplies amid drought concerns about the South American crop.

USDA will release its corn, soybean and wheat quarterly stocks figures on Tuesday morning. Href="NewsSearchID">ID:nN26416769

"The corn number is going to be the most watched, just from a feed usage perspective. We are all watching animal numbers and how poor they are," said Randy Mittelstaedt, an analyst with R.J. O’Brien.

The number of cattle in U.S. feedlots is down 5 percent from a year ago and the number of meat-producing chickens is down 6 percent, according to the latest USDA data. The U.S. hog herd was projected to be down 3 percent.

Corn exports have also slowed from last year’s record pace amid a slumping world economy and more competition for a place in feed rations from an abundant global supply of feed wheat.

U.S. ethanol makers also consumed less corn than expected because some plants slowed production as profits evaporated with a drop in fuel prices late last year, they said.

"We saw ethanol operating capacity cut back as the industry in general was unprofitable," said Shawn McCambridge, grain market analyst with Prudential Bache Commodities.

"That’s since improved, and that could be reflected in the next quarterly report, but this one should show us well off of last year’s usage for the quarter."

Analysts polled by Reuters on average expected USDA to put corn stocks as of March 1 at 7.010 billion bushels, up 2.2 percent from a year earlier, when stocks were at 6.860 billion bushels. Href="NewsSearchID">ID:nN26416769

SOYBEAN EXPORTS

A stronger-than-expected soybean export pace cut U.S. soybean stocks from year ago levels, despite a 7 percent year-on-year decline in the domestic soybean crush, analysts said.

Drought in southern Brazil and Argentina, the world’s No. 2 and No. 3 soybean exporting nations, helped boost demand for U.S. supplies amid worries about the South American crop, they said.

"Exports of soybeans have been running ahead of inspections and the big export number offsets a poor crush number," said Roy Huckabay, an analyst with the Linn Group.

Analysts on average expected USDA to put U.S. soybean stocks at 1.322 billion bushels, down 7.5 percent from a year earlier.