CHICAGO (Dow Jones)--U.S. wheat futures are expected to start mixed Friday as traders assess demand for the grain before the U.S. Department of Agriculture releases key crop reports.

In overnight electronic trading, soft red winter wheat for December delivery, the most actively traded contract, slipped 1/2 cent, or 0.07%, to $7.37 1/2 a bushel at the Chicago Board of Trade. Prices were slightly higher for wheat futures traded in Kansas City and Minneapolis.

Traders are assessing demand as the USDA is expected Monday to trim its outlook for wheat inventories in a monthly supply and demand report, known as WASDE. The government may raise its forecasts for how much wheat is being used for animal feed because livestock and poultry producers are increasingly opting to feed wheat instead of high-priced corn.

"Sentiment is likely to remain cautious ahead of Monday's USDA WASDE report," wrote analysts for Barclays Capital.

Yet, foreign demand for U.S. wheat has been weak due to increased competition for export business from countries in the Black Sea region. Weekly wheat export sales of 512,200 tons were slightly above traders' expectations but still considered lackluster.

India didn't help the outlook for foreign sales by announcing Thursday that it would scrap export bans on wheat and rice. The news "added to an already negative tone in the wheat complex," said Brian Henry, analyst for Benson Quinn Commodities, a brokerage in Minnesota.

Traders are trying to determine whether the lack of export business will offset an expected increase in wheat used for feeding. Analysts, on average, expect the USDA will forecast wheat supplies at 667 million bushels at the end of May 2012, down just 0.6% from its August estimate, according to a Dow Jones Newswires survey.