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U.S. corn and wheat surpluses will be larger than analysts forecast, as increased competition from Canada and South America slow exports, a U.S. Department of Agriculture report showed.

Corn supplies on Aug. 31, before the next crop is harvested, will be 1.837 billion bushels, according to the USDA's latest World Agricultural Supply & Demand Estimates (WASDE) published Tuesday in Washington.

That's higher than the agency's January projection and also more than the average of analysts' and trading firms' estimates compiled by Bloomberg.

For wheat, the USDA now sees inventories as of May 31 reaching 966 million bushels, exceeding the January forecast and the average estimate from the survey.

Soybean stocks as of Aug. 31 are now estimated at 450 million bushels, up from 440 million previously.

Exports of wheat and corn are projected to be less than last month's forecast, the report showed, with wheat sales abroad falling to their lowest since the 1971-72 marketing year. A stronger dollar and ample global crops have made U.S. farm goods less attractive to foreign buyers, adding to woes in the rural economy.

In a separate report Tuesday, the USDA forecast American farmer net income will fall for a third straight year, to $54.8 billion, as persistent surpluses depress crop and livestock prices.

Price reaction was mostly muted. Wheat futures for delivery in March fell 0.2 percent to $4.5775 a bushel at 11:45 a.m. on the Chicago Board of Trade. Corn futures for March delivery were down 0.5 percent at $3.605 a bushel. Soybeans futures for March delivery were down 0.3 percent at $8.6025 a bushel

"The market reaction in corn and soybeans is a signal that traders are no longer comfortable putting on new short positions," Dale Durchholz, senior market analyst for AgriVisor LLC in Bloomington, Illinois, said by phone. "The supply bear market is running out of gas, until we are assured of a good crop this year."