Wheat falls on large world supply; corn and soy edge up

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Wheat down on weak European prices and large world supplies

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Market awaits more results from Pro Farmer crop tour

(Updates throughout, updates byline/dateline,)

By Heather Schlitz

CHICAGO, Aug 21 (Reuters) - Chicago Board of Trade wheat futures fell on Wednesday as heavy world supplies and cheap Black Sea exports weighed on prices, ahead of a potential Canadian rail stoppage on Thursday.

Chicago soybean ticked higher as the U.S. Agriculture Department reported a third day of soybean sales to China in a row. Corn futures were choppy as hedge funds unwound short positions and traders monitored the results of a major crop tour.

A stoppage of Canadian freight railway operations would disrupt North America's agricultural supply chain, but a continued stream of cheap Russian wheat exports may blunt any uptick in demand for U.S. grains, Karl Setzer, partner at Consus Ag, said.

"If the strike does happen, I think we might see a bump in demand, but given the price spread between the U.S. and others, it may be limited," Setzer said.

Canada is the world's No. 3 wheat exporter, while the U.S. is No. 4.

The most-active soybean contract on the Chicago Board of Trade (CBOT) was last up 2-1/2 cents to $9.78-1/2 a bushel by 1630 GMT. CBOT corn edged 1/4 cent higher to $3.98-1/4 a bushel, while CBOT wheat eased 11-1/4 cents to $5.22 a bushel.

Grain markets are tracking the Pro Farmer crop tour in the U.S. Midwest this week.

While results have shown above-average potential for corn and soybeans in several states, feedback has failed to add to already high expectations for the upcoming harvests, analysts said.

Forecasts from Illinois and the western third of Iowa are expected later on Wednesday.

Corn and soybeans have lingered near four-year lows on pressure from an anticipated bumper harvest and beneficial weather in the U.S. Midwest. Hedge funds may be exiting their large short positions as prices seem to be bottoming out, traders said.

"They've already made money being short," said Joe Davis, broker at Futures International. "The larger hedge funds are moving to other markets." (Reporting by Heather Schlitz in Chicago; additional reporting by Mei Mei Chu in Beijing, Gus Trompiz in Paris and Naveen Thukral; editing by Sonia Cheema, Jason Neely and Jonathan Oatis)