(Reuters) - Corn slumped more than 6 percent on Friday as a surprise rise in U.S. crop and stocks estimate fuelled more selling after record losses in the previous day, putting commodities to a wobbly start for the third quarter. Oil and base metals also retreated with copper snapping a three-day winning streak as investors hunkered down. News of Chinese factory output expanding at its slowest pace in 28 months gave investors another excuse to stay out of commodities, which posted their biggest quarterly loss since the 2008 financial crisis in April-June. But corn was the biggest loser as Thursday's sell-off extended into Asian hours on Friday after a U.S. government report which showed stockpiles in the world's No. 1 exporter of the grain were far bigger than thought and a bumper harvest was on the way. The most-active December corn contract on the Chicago Board of Trade fell more than 6 percent to as low as $5.81- a bushel, its weakest since mid-March. At one point on Thursday, the spot July contract fell by as much as 11.9 percent. "Now that we've seen the sentiment change, if we get another weak macroeconomic data next week, then there's nothing to say corn can't go to $5.50 in this environment," said Paul Deane, senior agricultural economist at Australia and New Zealand Bank. "But somewhere between $5.50 and $6, corn is starting to represent good value. I think the market was probably overreacting to the quarterly stocks number. We've seen a lot of volatility in this number in the last 12 months or so." Losses in corn spread to wheat although prices quickly recovered from lows. The most-traded CBOT September wheat was trading down 0.4 percent at $6.12 a bushel, off a low of $5.92 earlier, a level not seen since July 2010. China's January corn contract on the Dalian Commodity Exchange slid more than 2 percent to a record-contract low of 2,256 yuan per tonne. NOT TOO SHABBY Brent crude dropped below $112 a barrel and U.S. oil slipped below $95 after the data from China, the world's second-largest oil importer, indicated the country was feeling the pinch of monetary policy tightening and slack global demand. The official purchasing managers' index (PMI), designed to provide a snapshot of conditions in China's vast manufacturing sector, fell to 50.9 in June from 52 in May, the China Federation of Logistics and Purchasing said. The weak data also weighed on base metals. London copper dropped 0.8 percent to $9,354 a tonne and zinc fell 1.4 percent to $2,331. "The China PMI number is not the most bullish news I've heard this year, but not entirely unexpected given the impact of monetary tightening and power shortages in China," said Citigroup analyst David Thurtell. "But as power shortages ease and the Chinese authorities come to the end of the tightening cycle, the outlook for base metals in the second half is not too shabby." The 19-commodity Reuters-Jefferies CRB index .CRB, a global benchmark, finished the second quarter 6 percent down. That was its biggest decline since the fourth quarter of 2008, after the collapse of Lehman Brothers triggered a global financial market meltdown. The third quarter, while fraught with risks ranging from a struggling U.S. economy without the aid of further stimulus and persistent worries about Europe's debt problems and a cooling Chinese economy, may not turn out to be all that bad, analysts say. "I think what we're going to see is more covert operations by the Federal Reserve to ensure that the price of commodities remain within a range, if not lower, and that should help stimulate demand and once they see demand I think everything is alright," said Jonathan Barratt, managing director at Commodity Broking Services in Sydney. "This quarter is all about prices that will be not too aggressive, within ranges. The fourth quarter is where prices will start to pick up." (Additional reporting by Rujun Shen; Editing by Himani Sarkar)

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