GRAINS-Corn set for weekly gains of 4% on upbeat global demand

* Corn set for biggest weekly rise in a month on tight US supplies

* Wheat down 1%, but market eyes weekly gains on weather concerns (Adds quote in paragraph 3, details on U.S. soybean crushing, Argentina taxes)

SINGAPORE, Oct 2 (Reuters) - Chicago corn futures slid on Friday, although the market is set end the week on a positive note, trading near a seven-month peak as strong global demand underpinned prices.

Wheat fell 1.1%, but prices are up for the week as dryness threatens producers Russia and Argentina.

“The demand story for grains and oilseeds is bullish for prices,” said one Singapore-based trader. “We are unlikely to see big decline in prices for current levels as some buyers have been hoping for.”

The most-active corn contract on the Chicago Board Of Trade gained 4% so far this week, the biggest weekly gain since Aug. 28.

Corn was down 0.9% at $3.79-1/2 a bushel, as of 0245 GMT, after firming 1% on Thursday when prices hit the highest since early March at $3.85-1/2 a bushel.

Soybeans are up 1.5% for the week after falling 4% in the previous week and wheat has added 3.6% this week, after closing down 5.3% last week.

The U.S. Department of Agriculture reported more than 2 million tonnes of corn sold in the week ended Sept. 24. Weekly soybean export sales also exceeded expectations at nearly 2.6 million tonnes.

American soybean and corn stockpiles were smaller-than-expected as China stepped up its purchases of U.S. supplies during the summer, the U.S. government said earlier this week.

In what could increase competition for U.S. suppliers, Argentina has cut taxes on exports of soybeans.

Argentina has temporarily cut soybean, soymeal and soyoil export taxes by 3 percentage points to 30% to help stimulate export revenue, the government announced on Thursday, as the country struggles with recession and dwindling foreign reserves.

U.S. soybean crushings in August likely dropped to the lowest point in six months to 5.272 million short tons, or 175.7 million bushels, according to the average forecast of nine analysts surveyed by Reuters ahead of a monthly U.S. Department of Agriculture (USDA) report.

Commodity funds were net buyers of CBOT corn and soymeal futures contracts on Thursday and net sellers of wheat, soyoil and soybean futures, traders said. (Reporting by Naveen Thukral, Editing by Sherry Jacob-Phillips)