GRAINS-Corn down 2 pct as USDA fuels demand fears

* Corn extends losses on poor demand, rising supplies

* Soy regains some ground on dry Argentina, Chinese demand

* Strengthening dollar weighs on U.S. commodities

* European wheat steady on weaker euro, Egypt tender hopes

(Updates throughout after Euronext opening, pvs SINGAPORE)

By Valerie Parent and Naveen Thukral

PARIS/SINGAPORE, Jan 13 (Reuters) - U.S. corn futures
dropped 2 percent on Tuesday, a day after falling by their daily
limit on a U.S. Department of Agriculture report showing the
global recession was weakening demand and swelling supplies.

Soybean futures recouped a little of their daily-limit fall
on Monday, helped by continued dryness in Argentina and robust
demand from China, while wheat inched lower after also racking
up huge losses in the previous session on the bearish U.S. data.

"We are looking at demand and supply reports, corn demand
has been cut and that is a very big surprise," said Genichiro
Higaki, head of the proprietary fund management team at Sumitomo
Corp in Tokyo.

"And also the reduction includes a cut in ethanol demand;
demand for ethanol has started diminishing at this moment and
that is a bearish factor."

As part of its January crop report, the U.S. Department of
Agriculture raised its estimate on U.S. grain stocks and cut its
estimate of the amount of corn to be used this year by the
ethanol industry, exporters and livestock feeders.
[ID:nN12496740]

Chicago Board of Trade corn futures for March CH9 delivery
lost 8 cents to $3.72-1/2 per bushel by 1143 GMT, after dropping
by the 30-cent limit in U.S. trade.

The most-active March soybean contract SH9 rose 4-1/2
cents to $9.70-1/2 bushel, while March wheat WH9 was down
2-1/2 cents at $5.67-1/4 a bushel. On Monday, soy fell by its
limit of 70 cents and wheat settled down 59-3/4 cents, just
above its 60-cent limit.

The January SF9 soybean futures, which is expiring on
Wednesday, was up 16 cents after plunging 83-1/2 cents per
bushel in the last session.

EXPORT, WEATHER SUPPORT

U.S. grain futures were also under pressure from a rising
dollar, which hit a one-month high against the euro on Tuesday
as expectations grew of a rate cut this week by the European
Central Bank and as investors shifted towards the dollar as a
lower-risk asset. [FRX/]

The falling euro on the other hand provided some support to
European milling wheat futures, which recovered from an opening
drop to trade slightly higher.

The front-month March contract BL2H9 was up 0.75 euros at
143.50 euros a tonne by 1143 GMT. It had fallen as low as 139
euros in early deals, following Monday's 4 percent decline, as
operators continued to react to the USDA report.

Euronext prices were also buoyed by hopes Egypt may purchase
French grain in a tender on Tuesday, European traders said.

"Egypt is in need of volumes. There could be aggressive bids
for French wheat," one trader said, adding that offers could go
below $190 a tonne, free on board, for grain from France.

Egypt's main state buyer is seeking 55,000-60,000 tonnes of
wheat in a tender whose results are expected around 1430 GMT.
[ID:nN12351063]

Following Monday's USDA figures, some analysts said the
worst may be over as grain markets await news on fundamental
factors, such as the crop-threatening dry weather in South
America and planting estimates in for the next U.S. crop.

Soybeans have also found support in hefty demand from China,
the world's top soybean buyer.

The country imported a record 37.44 million tonnes of
soybeans in 2008, a rise of 21.5 percent from 2007, helped by
Beijing's purchases for state reserves, figures of the General
Administration of Customs showed. [ID:nPEK119977]

Grains prices as of 1143 GMT
Product Last Change Pct Move End 2008 Ytd Pct

move
CBOT corn 372.50 -8.00 -2.10 407.00 -8.48
CBOT soy 970.00 16.00 +1.68 972.25 -0.23
CBOT wheat 567.25 -2.50 -0.44 610.75 -7.12
CBOT rice 14.00 -0.56 -3.85 15.34 -8.74
European wheat 143.50 0.75 +0.70 137.25 +4.55
US crude 36.55
Euro/dollar 1.3316
(Corn, soybean, wheat U.S. cents per bushel)
(Rice U.S. cents per hundredweight)
(European wheat euros per tonne)
(Crude $ per barrel)
(Writing by Gus Trompiz, editing by Peter Blackburn)