* Crude oil prices slide 3%
* More beneficial rains forecast for Brazil soy
* Traders await U.S. crop report due Friday
CHICAGO, Jan 8 (Reuters) - U.S. corn futures sank to their lowest level in more than three years on Monday and soybean futures set a two-year low as steep declines in crude oil prices spilled over into agricultural markets, analysts said.
Technical selling and favorable rains in dry crop-growing areas of Brazil helped push down grain prices, after soybeans fell last week on improving harvest prospects in South America, analysts said.
The losses were a blow to U.S. farmers who will plant their next crops in the spring but benefit livestock producers who must buy grain and soy for animal feed.
"If they keep the crude market down, it's very difficult for the grains to get off the mat," said Jim Gerlach, president of brokerage A/C Trading.
Oil prices fell by more than 3%. The losses hit farm markets because corn is used to make ethanol and soybean oil is used to make biofuels.
Most-active Chicago Board of Trade corn futures were down 5-3/4 cents at $4.55 a bushel by 11:25 a.m. CST (1725 GMT) and hit their lowest price since December 2020.
Most-active soybeans tumbled 14 cents to $12.42-1/4 a bushel and reached their lowest price since December 2021. Wheat slid 20 cents to $5.96 a bushel.
"That crude oil has bled into just about everything," Gerlach said.
In Brazil, the world's top soybean exporter, recent rains have reduced concerns about crop losses. Rain is expected to become a bit more widespread this week, forecaster Maxar said.
"After dryness in Brazil in November and December, Brazil's crop weather is improving and the debate will be about how much larger the crop will be," said Matt Ammermann, StoneX commodity risk manager.
Grain traders adjusted positions before the U.S. Department of Agriculture updates its global supply/demand estimates in a monthly report due on Friday.
"We could see more increases in forecasts of the Brazilian soybean crop soon," Ammermann said. "With Argentina's crop also looking fine, the stage is being set for a record large South American soybean harvest this year." (Reporting by Tom Polansek in Chicago. Additional reporting by Michael Hogan in Hamburg and Naveen Thukral in Singapore; Editing by Subhranshu Sahu, Rashmi Aich, Chizu Nomiyama and Jonathan Oatis)
