CANBERRA - Chicago wheat futures slipped for a second day on Friday, as traders injected some caution into a rally fuelled by drought in top producer Russia that pushed prices to 3-1/2-month highs earlier in the week.

Corn futures also eased after reaching a three-month peak on Wednesday, although further gains in oil prices amid the Middle East conflict continued to support prices by boosting plant-made ethanol.

Soybeans fell as forecasts for rain in top producer Brazil boosted the supply outlook.

FUNDAMENTALS

* The most-active wheat contract on the Chicago Board of Trade was down 0.8% at $5.99 a bushel, as of 0017 GMT. The contract on Wednesday touched $6.17, its highest since June 14.

* Prices are still up around 3.4% this week.

* CBOT corn slipped 0.6% to $4.25-1/2 a bushel, having hit $4.34-1/4 on Wednesday, its highest since June 28. The contract was set for a 1.8% weekly gain.

* Soybeans were flat at $10.45-3/4 a bushel and down 1.9% so far this week.

* All three contracts fell to four-year lows in recent months, but have regained a little ground as central banks cut interest rates, the U.S. dollar weakened and adverse weather threatened supply.

* Oryol on Wednesday became the latest Russian region to declare a state of emergency due to adverse growing conditions, and the country's grain exporters' union called for a quota mechanism to limit shipments, heightening supply concerns.

* A spat between Russia and Kazakhstan, meanwhile, led to Moscow effectively banning imports and transit of Kazakh grain through Russian territory, Kazakh officials said.

* U.S. weekly wheat export sales reported by the government on Thursday exceeded expectations.

* On the demand side, however, Reuters reported that Egypt, one of the world's biggest wheat buyers, has developed plans to slash imports and use more corn or sorghum in state-subsided bread.

* In other crops, dry conditions are likely to impede corn planting efforts in Argentina's main agricultural core over the next seven days, the Buenos Aires grains exchange said.

* U.S. weekly corn exports came in well above analysts' expectations.

MARKETS NEWS

* Global stocks fell on Thursday, weighed by tepid trading in equity markets across the U.S. and other major regions, while oil prices jumped, buoyed by rising geopolitical tensions from the Middle East conflict.

(Reporting by Peter Hobson; Editing by Sherry Jacob-Phillips)