GRAINS-USDA forecast sends wheat futures down 1.6 pct

* Wheat futures fall on USDA forecast for large crop

* Bigger-than-expected stocks pressure soybean market (Updates with CBOT open, USDA report, new dateline, byline)

CHICAGO, Sept 30 - U.S. wheat futures fell 1.6 percent on Wednesday after a government report forecast a larger-than-expected U.S. crop this year and quarterly stocks topped analysts' estimates, traders said.

"I think it just supports the bearish market sentiment that exists," said Shawn McCambridge, grains analyst for Prudential Bache Commodities. "We continue to add bushels to the balance sheet amid light demand. It is going to be difficult to tighten this balance sheet this crop year."

Soybean prices also fell after the government's stocks report came in above expectations but a slow harvest and a rally in crude oil prices was limiting the downturn.

At 10:13 a.m. CDT (1513 GMT), Chicago Board of Trade December wheat futures WZ9> were down 7 cents at $4.40-1/2 a bushel. CBOT November soybeans were 3-1/2 cents lower at $9.13-1/2 a bushel.

The U.S. Agriculture Department on Wednesday boosted its forecast for 2009 U.S. wheat production by about 36 million bushels due to a larger-than-expected spring wheat crop. The total wheat crop was seen at 2.22 billion bushels, above the previous forecast for 2.184 billion bushels and topping the average analyst forecast of 2.194 billion bushels.

U.S. wheat stocks as of Sept. 1 were seen at 2.215 billion bushels, above estimates for 2.134 billion bushels. A year earlier, wheat stocks stood at 1.858 billion bushels.

"The report was bearish for wheat, there was nothing friendly for wheat at all," said Joe Bedore, CBOT floor manager for trade house FC Stone.

Wheat has lost more than 12 percent in the third quarter of 2009 on rising global supplies. A global wheat supply glut was highlighted by Australia, the world's fourth largest exporter, where September rains have ensured the wheat crop will meet forecasts of about 22 million tonnes, the biggest in four years.

USDA also said that U.S. soybean stocks as of Sept 1 were 138 million bushels, topping forecasts for 112 million bushels. The stockpile, which is still the smallest in six years, topped forecasts in part because the government boosted its estimate of the 2008 soybean crop by 7.8 million bushels.

"The biggest bearish note here is 138 million bushels on the (soybean) end stocks, clearly above trade ranges," said Joe Victor, analyst with Allendale Inc.

Corn stocks were smaller than expected, coming in at 1.674 billion bushels compared to the average analyst estimate of 1.719 billion bushels.

CBOT December corn was down 2-1/2 cents at $3.38-1/2 a bushel.

Harvest delays caused by cool and wet weather around the U.S. Midwest was lending support to the corn and soybean markets.

"It's the delay from rains that are the main concern," said Paul Haugens, vice-president for Newedge USA. "We are behind normal but eventually it will be harvested so I don't have any major concerns."

Crops were mostly in good shape but some worries about a frost damaging some late-developing corn and soybeans persisted in the market.

"I think what the grains markets are watching most closely at this time is any sort of weather impact on nascent crops for soybeans as well as corn. Both crops seem to be in pretty good shape at the moment," Barclays Capital analyst Sudakshina Unnikrishnan said.