GRAINS-Corn rises, soy dips on USDA supply outlooks

* Analysts expected USDA to increase corn supply outlook

* Inventories remain at 17-year low

* Steady soy supply surprises traders looking for a cut

(Updates with USDA data) CHICAGO, March 8 (Reuters) - U.S. corn futures jumped on Friday on a tighter-than-expected supply outlook from the U.S. Department of Agriculture, while soybeans stumbled on a bigger-than-expected forecast. The split reaction came as the USDA, in a monthly crop report, kept its forecast for supplies of both crops unchanged from February. Analysts polled by Reuters had expected the government to increase its estimate for corn inventories 1.7 percent and cut its estimate for soybean inventories 4 percent. The estimate for corn supplies was steady at 632 million bushels, a 17-year low, and the soybean supply estimate held at a nine-year low of 125 million bushels. "There's more concern about the tightness in corn," said Don Roose, president of U.S. Commodities. Chicago Board of Trade May corn climbed 1.3 percent to $7.00 a bushel by 1:35 p.m. CST (1930 GMT), while December corn gained 0.6 percent to $5.45. May soybeans dipped 0.2 percent to $14.71-1/4 a bushel, and November soybeans lost 0.6 percent to $12.70. The most surprising aspect of the report was a 2.2 percent increase in the forecast for the amount of U.S. corn that will be used for feed and "residual" purposes, said Alan Brugler, president of Brugler Marketing & Management. The adjustment looked bullish because low-priced wheat was thought to be displacing corn as feed for livestock, he said, noting USDA's "confidence on the feed use" of corn. The USDA said the 100-million-bushel bump came from a continued expansion in poultry production and a 10-million-bushel reduction in the projected feed and residual use of sorghum, another livestock feed.

BRAZIL BACK-UP The USDA unexpectedly raised its estimate for global soybean supplies, adding further pressure on soy prices. It kept the estimate for Brazil's soy crop unchanged, while analysts were looking for a slight decline. "Beans got the worst end of the deal from the standpoint of South America supplies, the Brazilian production number, and U.S. stocks not being changed," said Mike Zuzolo, president of Global Commodity Analytics & Consulting. Demand for soybeans has been shifting to the United States from Brazil as port delays have slowed the flow of soybeans from South America. Soybeans from new crops in Brazil and Argentina are urgently needed to replenish tight global supplies after the worst U.S. drought in 50 years reduced last year's U.S. harvest. In the near term, the flow of soybeans from South America could slow even further as Brazilian dock workers are planning a 24-hour nationwide strike on March 19, traders said.

"Logistics continue to plague Brazil's export program," said Karl Setzer, grain solutions team leader for MaxYield Cooperative.

WHEAT SUPPLY EXPANDS The USDA raised its forecast for U.S. wheat supplies 3.6 percent from last month to 716 million bushels due to poor export demand, topping the 1.9 percent increase analysts were expecting. CBOT May wheat slipped 0.1 percent to $6.94-3/4 a bushel.

Prices at 1:35 p.m. CST (1935 GMT)

LAST NET PCT YTD CHG CHG CHG CBOT corn 721.75 10.25 1.4% 3.4% CBOT soy 1509.50 6.00 0.4% 6.4% CBOT meal 437.00 1.00 0.2% 3.9% CBOT soyoil 50.25 -0.15 -0.3% 2.2% CBOT wheat 687.00 0.25 0.0% -11.7% CBOT rice 1515.50 -0.50 0.0% 2.0% EU wheat 234.00 -4.25 -1.8% -6.5%US crude 91.85 0.29 0.3% 0.0% Dow Jones 14,383 54 0.4% 9.8% Gold 1578.60 .20 0.0% -5.7% Euro/dollar 1.3009 -0.0095 -0.7% -1.4% Dollar Index 82.6670 0.5860 0.7% 3.6% Baltic Freight 843 9 1.1% 20.6% * All grain and oilseed prices for second position. Paris

futures prices in Euros per tonne, London wheat in pounds per tonne and CBOT in cents per bushel.

(Additional reporting by Karl Plume and Julie Ingwersen; Editing by Jim Marshall, Gunna Dickson and Sofina Mirza-Reid)