GRAINS-Corn climbs to one-month high and wheat advances

* Favourable crop outlook in Brazil keeps pressure on soy

* Wheat supported by severe drought in southern US Plains

* Corn continues to climb on tightening supplies

(Adds quotes, updates prices, previous Singapore)

LONDON, Jan 15 (Reuters) - U.S. corn prices climbed to a one-month high on Tuesday, driven by tightening global supplies, while wheat advanced for the third day in a row on expected strong export demand.

Soybeans fell back after a steep advance in the prior session.

Corn prices have risen sharply following a U.S. Department of Agriculture report on Friday, which estimated inventories in the world's top exporter will reach a 17-year low.

"We are bullish on corn as supplies are going to tighten further," said Serene Lim, a commodities analyst at Standard Chartered Bank in Singapore. "For wheat, the market will be closely watching the U.S. weekly export data as everyone is expecting U.S. exports to rise."

Chicago Board of Trade March corn was up 0.3 percent to $7.26-1/4 a bushel by 1200 GMT after earlier reaching $7.27-3/4, its highest since Dec. 17.

March wheat rose 0.7 percent to $7.71-1/2 a bushel.

As of Dec. 1 the United States had 8.03 billion bushels of corn on hand, the USDA said in its monthly report on Friday, below even the low end of market expectations, which averaged 8.28 billion.

It estimated that inventories at the end of the crop's marketing year on Aug. 31 will be at a 17-year low of 602 million bushels, less than a three-week supply and almost 10 percent smaller than expected by analysts.

Wheat prices were boosted by expectations for higher demand for U.S. supplies and a severe drought in the southern U.S. Plains.

The USDA on Friday put the U.S. hard red winter wheat area at 29.1 million acres, down from 29.86 million in the prior season and sharply below a trade consensus of 30.185 million.

ABANDONED AREA

"We question the number as really poor corn yields and high wheat prices should have at least seen the hard red winter wheat farmer maintain if not expand their planting area," Macquarie said in a market note on Tuesday.

"The risk is that USDA's survey has lost some area that has already been abandoned rather than not planted."

March milling wheat in Paris rose 1.0 euro or 0.4 percent to 250.50 euros ($330) a tonne.

CBOT March soybeans fell 0.7 percent to $14.08-1/4 a bushel, slipping back after a sharp advance on Monday.

Dealers said U.S. soybean prices had been boosted on Monday by news of a sale to China but that a favourable outlook for Brazilian production helped to put the market back on the defensive.

The USDA last week raised its forecast of the Brazilian 2012/13 crop to 82.5 million tonnes from 81.0 million. It forecast this year's U.S. soybean crop at 82.1 million.

"Brazil also looks set to replace the U.S. as the world's number one exporter, which should limit the upside potential of soybean prices," Commerzbank said in a market note.

Estimates of production have crept up since a severe drought sparked worries of major crop losses during the summer.

Rains forecast in most of Brazil's top soy-producing states this week should help the crop, but a dry period will hit the far south later this month, local meteorologist Somar said. ($1 = 0.7482 euros)

(Additional reporting by Naveen Thukral in Singapore; editing by Jane Baird)