* Corn drops limit as longs exit market on dry Iowa fields
* Plains rain weighs on wheat futures
* Soybeans lower, following weakness in corn markets
* Coming up: First notice day for CBOT contracts (Updates with closing prices, adds new analyst quote, details on fund selling)
By Mark Weinraub
CHICAGO, April 28 (Reuters) - U.S. corn futures plunged to their lowest level in nearly a month on Thursday amid the biggest fund liquidation this year as a resumption in planting in western stretches of the Corn Belt alleviated concerns about supply, traders said.
Corn fields in parts of north-central Iowa proved drier than expected, allowing farmers to get back on their tractors as much as a week earlier than forecast.
"The longs have been looking for an excuse to take some profits," said Bob Utterback of Utterback Marketing Services, a brokerage for farmers.
CBOT May corn settled down 29-1/4 cents at $7.23 a bushel. The more heavily traded July corn contract ended down 30 cents, the daily trading limit, at $7.29-1/4.
Beneficial weather for crops also weighed on wheat prices, which were down for the third straight day. In this case, rain in key growing areas of the U.S. Plains provided some relief for the drought-stressed crop, traders said.
CBOT May wheat was down 34 cents at $7.43 a bushel and has fallen 10 percent during its three-day losing streak.
The drop in corn weighed on soybean prices, which reversed early gains. CBOT May soybeans settled down 27-3/4 cents at $13.50-1/4 a bushel.
"The biggest factor is commodity funds' wide sell-off in all the grains," said Brian Hoops, president of Midwest Market Solutions, a brokerage and commodity marketing advisory service. "I think it is a combination of the end-of-the-month selling, along with improving weather (that led to the declines)."
Funds sold an estimated net 40,000 corn contracts on Thursday, according to trading sources on the floor of the Chicago Board of Trade. That matches the heaviest daily total of the year. Funds also sold 40,000 contracts on March 15.
Talk of a large investment fund taking big positions out of commodities markets helped spark the broad sell-off in agricultural futures.
OPEN INTEREST DECLINES
"Investors are shifting their money, reducing some of their exposure to risk," said Shawn McCambridge, grains analyst with Prudential Bache Commodities.
Traders noted long liquidation as investors exited positions ahead of first notice day for deliveries on Friday.
Open interest in CBOT corn fell by 40,125 contracts Wednesday, the biggest one-day drop since late February, according to data from the CME Group.
Trading volume was heavy, with about 560,000 corn contracts changing hands, the most since February. Soybeans and wheat also surpassed their 30-day averages.
"We are starting to see a little bit of leakage of the weather-related risk premiums," said Karl Setzer, market analyst with MaxYield Cooperative.
Rainfall in the Plains this week boosted confidence about health of the hard red winter wheat crop in Kansas, the top wheat-producing state. The forecast calls for more storms this weekend.
U.S. wheat futures faced more pressure as Ukraine's Agriculture Ministry boosted its 2011 grain harvest estimate and forecast a jump in exports. A devastating drought in the Black Sea region during 2010 decimated the crop there and raised the profile of U.S. wheat on the world market. (Additional reporting by Michael Hirtzer; Editing by Alden Bentley, David Gregorio and Lisa Shumaker)