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GRAINS-Wheat falls 7th day, corn nears 3-mth low on weather

(Adds analyst comment and updated prices; changes byline, dateline, previous LONDON)

* Drought conditions ease in U.S. Plains, rains in Midwest

* Wheat heading for largest monthly decline since Sept 2011

* Soybeans boosted by tight old crop supplies in the U.S.

CHICAGO, May 29 (Reuters) - U.S. grains slumped on Thursday, with wheat futures heading for their seventh straight session of declines on investor long liquidation tied to favorable weather for crops and cheaper supplies on offer in Europe and the Black Sea region. Wheat futures have fallen sharply from the more than 10-month high they notched early this month amid a deep drought in the southern U.S. Plains hard red winter wheat belt. But crop-friendly rains fell over the weekend, while a weekly weather report early on Thursday showed drought conditions moderating. Chicago Board of Trade wheat futures for July delivery eased 7-1/4 cents to $6.31-1/2 per bushel, the lowest in about three months. Wheat on a continuous chart was on track to shed about 11.5 percent this month for the worst such performance since September 2011. Corn futures for July delivery were down 4-1/2 cents at $4.68 per bushel as of 11:46 a.m. CDT (1646 GMT). Corn was hovering just above the near three-month low notched in the previous session. Showers were lingering in the Midwestern crop belt, while further precipitation forecast next week should benefit recently planted corn seeds, the Commodity Weather Group said in a note. The weekly U.S. Drought Monitor showed a slight expansion of abnormally dry areas in the Midwest even as the most severe drought conditions eased in the Plains. "The reality is hitting the market," said Don Roose, analyst at U.S. Commodities in West Des Moines, Iowa. "Funds have been big longs throughout the spring and they're sitting with a sizable position in a more favorable weather environment." U.S. regulatory data last week showed that speculative investors, a category that includes hedge funds, reduced their long bullish bets in corn for a third straight week and switched to a net short, or bearish, position on wheat futures. The better conditions in the United States come as countries such as Ukraine have undercut U.S. shippers in international markets. "Ukraine is selling wheat in our backyard to Mexico. We have Europe beating everyone to the punch. The competition is keen," Roose added. CBOT July soybean futures edged 1-3/4 cents higher to $14.99-1/2 per bushel, boosted by snug supplies and strong bids "Soybeans are getting a boost from tight U.S. stocks," said Andrew Woodhouse, a grains analyst at Advance Trading Australasia. "Crush margins in China have improved over the last couple of weeks, before which soybean cargoes were being diverted from South America to the U.S." China has more than 5 million tonnes of U.S. soybeans on the books for 2014/15, on its way to an estimated 72 million tonnes from all suppliers for the year. It now represents about two thirds of global soybean imports.

Prices at 11:46 a.m. CDT (1646 GMT)

LAST NET PCT YTD CHG CHG CHG CBOT corn 468.00 -4.50 -1.0% 10.9% CBOT soy 1499.50 1.75 0.1% 14.2% CBOT meal 498.30 -0.20 0.0% 13.8% CBOT soyoil 39.41 -0.22 -0.6% 1.5% CBOT wheat 631.50 -7.25 -1.1% 4.3% CBOT rice 1504.00 -1.00 -0.1% -3.0% EU wheat 191.75 -0.75 -0.4% -8.3% US crude 103.51 0.79 0.8% 5.2% Dow Jones 16,648 15 0.1% 0.4% Gold 1256.00 -2.14 -0.2% 4.2% Euro/dollar 1.3608 0.0019 0.1% -0.3% Dollar Index 80.4480 -0.1230 -0.2% 0.5% Baltic Freight 940 -14 -1.5% -58.7%

(Additional reporting by Nigel Hunt in London and Colin Packham in Sydney; Editing by Himani Sarkar, Jane Baird and Peter Galloway)