• Corn, wheat, soybeans ease after rally
• Grains set for biggest weekly rise since July 22
• USDA puts corn, soy ending stocks below estimates
• Market eyes reaction from buyers for direction

Chicago corn and wheat eased on Friday but the grain markets are on track for biggest weekly gain in almost three months, buoyed by a U.S. government forecast of tighter global supplies.

Corn traded near Thursday's four-week top after the U.S. Department of Agriculture slashed its forecast for global ending stocks and estimated the drought-plagued U.S. crop will be the smallest in six years.

Wheat has risen for four out of five sessions, with renewed support from the USDA's global supply-demand report which estimated lower production in Australia, Russia and the European Union.

Soybeans also eased after the last session's 1.7 percent rally which was triggered by USDA figures showing the stocks-to-use ratio at its tightest since the mid-1960s.

"U.S. and global corn supplies have been revised sharply lower this month, reigniting supply fears," said a commodities strategist in Sydney.

"World wheat output for 2012/13 has been cut by roughly 6 million tonnes to 653 million because of smaller Australian, Russian and EU27 crops."

Chicago Board of Trade December corn fell 0.3 percent to $7.70-3/4 a bushel by 0301 GMT, trading not farm from Thursday's near four-week high of $7.76 a bushel.

December wheat lost 0.4 percent to $8.82-1/2 a bushel and November soy gave up 0.3 percent to $15.43-3/4 a bushel.

USDA estimated the U.S. corn crop at 10.706 billion bushels, above the average analyst estimate of 10.601 billion bushels. The estimate was only just below last month's forecast but down 13 percent from last year. The government estimated the U.S. corn yield at 122.0 bushels per acre, below the average forecast of 122.884 bpa.

The U.S. soy crop estimate was raised 9 percent from last month and also came in above analysts' estimates, with the crop pegged at 2.860 billion bushels, compared to the average trade estimate of 2.764 billion.

U.S. corn ending stocks in 2012/13 were forecast at 619 million bushels, below trade estimates for 648 million.

For U.S. soybeans, larger exports and domestic crushing this marketing year would boost their use by 9 percent from the USDA's September estimate, overwhelming an upturn in the crop and limiting end stocks to a thin 130 million
bushels. "The balance sheet doesn’t change all that much as all that extra production on the beans side is going into exports anyway," said an agricultural strategist in Singapore. "There is a lot of work prices need to do to ration demand and to get the farmers to sell enough beans." It was the second time in two weeks the agriculture department surprised the markets with smaller-than-expected estimates of stocks.

Drought will reduce Australia's wheat crop to 23 million tonnes, down 12 percent from a month ago, the USDA said. Harsh weather, including summer droughts and early frosts, cut an additional 3 percent from Russia's wheat crop, it said.

Overall, world wheat stocks would drop by 13 percent from last year's level, the USDA said. It would be the lowest ending stocks level in four years.