* Largest US soybean crop, No. 2 corn crop in 2009
* "Sharply lower summer price prospects" for corn
* Corn-to-ethanol down 100 million bushels for 2008/09
* Lower corn, soybean, wheat prices in 2009/10 (Updates with market reaction and other details)
By Charles Abbott
WASHINGTON, July 10 (Reuters) - U.S. farmers will harvest their largest soybean crop and the second-largest corn crop ever, averting a potential supply squeeze while also leading to softer prices for the commodities, the government said on Friday.
The U.S. Agriculture Department said corn farmers face "sharply lower summer price prospects." Good weather and boosted plantings bode for a bumper crop.
Crop prices will return to "more normal" levels after last summer's problems in the world's top corn and soy producer helped drive prices to record highs, said Gerald Bange, chairman of the USDA's World Agriculture Outlook Board.
"The crop conditions are really not bad in most of the places where we're looking," Bange said on USDA's radio service.
The government boosted its corn crop forecast to 12.29 billion bushels, the second largest on record due to the second-largest plantings since 1946.
New-crop December corn futures CZ9 at the Chicago Board of Trade dropped 3 percent to $3.30 per bushel on Friday, pressured after the USDA said stocks were larger than traders had expected.
"The old-crop ending stocks (for corn) ballooned up here," said Don Roose, analyst at U.S. Commodities. "In the end, the government took the very conservative road and left the yields unchanged on corn and soybeans."
Soybeans SX9 were down 2 percent to $8.96 per bushel and wheat futures WU9 also dropped.
Overall, USDA monthly crop data for corn, soybeans and wheat came in near expectations.
In its monthly update, USDA projected a soybean crop of 3.26 billion bushels, the largest on record. It would replenish a stockpile forecast to shrink to 110 million bushels, the smallest in three decades and less than a two-week supply.
"We were looking for a bearish report and we got it," said Jack Scoville, vice president at Price Futures Group. "The soybeans are probably a bit negative and the wheat production was at, or just above, trade expectations."
The wheat crop was estimated at 2.112 billion bushels, including 1.53 billion bushels of winter wheat, 81.2 million bushels of durum and 506 million bushels of other spring wheat.
U.S. crop prices soared to record levels since 2006 but will moderate in the 2009/10 marketing year, USDA said.
It projected an average farm-gate wheat price of $5.30 a bushel, corn $3.75 a bushel and soybeans $9.30 a bushel.
By comparison, the farm-gate price for 2008's crops are estimated at a record $6.78 for wheat, $4.05 for corn and $10 for soybeans.
USDA lowered its forecast of corn used to make ethanol for this marketing year by 100 million bushels, to 3.65 billion bushels, due to lower U.S. fuel use
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