GRAINS-Wheat, corn up 2 percent on tight supplies

* Wheat rises 2.3 percent, corn up 2 percent, soy rebounds

* Corn supplies to tighten on strong U.S. demand

* Wheat firms as dryness threatens U.S. winter crop

(Updates, adds PARIS dateline) PARIS/SINGAPORE, Jan 14 (Reuters) - U.S. wheat jumped 2.3 percent on Monday, approaching its highest since early January, while corn rose 2 percent to a new three-week high, with grain markets underpinned by forecasts of tightening supplies. Soybeans rose 1.3 percent as the market recovered from a six-month low and snapped a four-session losing streak, supported by strengthening corn futures. The wheat market is being buoyed by dryness in the U.S. Plains, which threatens to curb winter crop yields. The U.S. Department of Agriculture estimated U.S. winter wheat seedings at 41.82 million acres in its monthly report on Friday, 2 percent less than expected. "The market was overly optimistic about supply ahead of the publication, so prices are likely to continue to rise," Commerzbank said in a note. The U.S. government declared much of the central and southern Wheat Belt a natural disaster area last week due to persistent drought that imperils this year's winter wheat crop. In its first disaster declaration of the new year, it made growers in large portions of four major wheat-growing states - Kansas, Colorado, Oklahoma and Texas - eligible for low-interest emergency loans due to the drought. The USDA pegged U.S. wheat inventories at the end of the crop's marketing year on May 31 at a four-year low of 716 million bushels. That was down 5 percent from USDA's December estimate and 3.4 percent smaller than expected. A decline in U.S. inventories comes after lower wheat production last year in Australia and Russia, the world's second- and third-largest exporters. There is some relief for lower-quality wheat buyers, with Indian export expected to climb to a record high of around 6 million tonnes in 2013.

Russian export wheat prices have risen strongly in recent weeks and have now exceeded French wheat, the Institute for Agricultural Market Studies (IKAR) said. At the same time Australian wheat was offered at the lowest price in Iraq's latest tender, traders said.

LOW CORN STOCKS As of Dec. 1 the United States had 8.03 billion bushels of corn on hand, the USDA said, below even the low end of market expectations averaging 8.28 billion.

Inventories at the end of the crop's marketing year on Aug. 31 are estimated at a 17-year low of 602 million bushels, less than a three-week supply and almost 10 percent smaller than expected. "Corn demand from the feed industry in the U.S. is quite strong with some switchover from feed wheat," said Joyce Liu, an investment analyst at Phillip Futures in Singapore. "I think corn prices have a potential to go even higher." The USDA data vindicated Morgan Stanley's bullish views for the agriculture markets, the U.S. bank said in a note, adding that it remained positive on near-dated corn prices from these levels as U.S. and global corn inventories remained precariously low and U.S. demand not yet adequately rationed. "However, we expect longer-dated prices to come under more pressure, as assumptions of normal weather prompt estimates of record 13/14 production," it said. Chicago Board of Trade March wheat climbed 2.3 percent to $7.72 a bushel by 1132 GMT. March corn rose 2 percent to $7.23-1/4 a bushel, after touching a new three-week high of $724 a bushel. Chicago soy bounced back after dropping to its lowest since June but the market is likely to come under pressure from estimates of record production in South America. March soybeans rose 1.3 percent to $13.90-3/4 a bushel, after dropping to $13.51-1/2 a bushel on Friday which was the contract's lowest since end-June. Brazil will harvest a record 82.5 million tonnes of soybeans this spring due to record plantings and improving yield prospects, according to USDA. With a mammoth crop, Brazil would surpass the United States as the world's No.1 soy grower and exporter for the first time.

Prices at 1132 GMT

Product Last Change Pct Move End 2011 Ytd PctCBOT wheat 772.00 17.25 +2.29 652.75 18.27 CBOT corn 723.25 14.50 +2.05 646.60 11.85 CBOT soy 1390.75 17.50 +1.27 1198.50 16.04 Paris wheat 248.50 3.75 +1.53 195.25 27.27 Paris maize 240.75 4.00 +1.69 197.25 22.05 Paris rape 456.00 4.50 +1.00 421.50 8.19 WTI crude oil 94.06 0.50 +0.53 98.83 -4.83 Euro/dlr 1.34 0.07 +5.15 1.30 3.10 * CBOT futures prices are in cents per bushel, Paris futures in

euros per tonne, WTI crude oil in dollars per barrel.

(Editing by Anthony Barker)