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GRAINS-Corn prices weaken as U.S. harvest gathers pace

* Corn loses more ground as market eyes near-record U.S. crop

* Resurgent dollar dents outlook for U.S. wheat exports (Adds quotes, updates prices)

LONDON, Sept 27 (Reuters) - Chicago corn futures were lower on Wednesday as favorable conditions for the U.S. harvest helped to boost already abundant supplies, while wheat and soybean prices also weakened.

The most-active corn contract on the Chicago Board Of Trade fell 0.5 percent to $3.50-1/2 a bushel by 1056 GMT.

"It is not just expectations of good yields for the U.S. corn crop. Farmers are selling, which is adding pressure on prices," said Ole Houe, an analyst with brokerage IKON Commodities in Sydney.

"Farmers don't sell sometimes when prices are low."

The USDA's weekly crop progress report showed the U.S. corn harvest was 11 percent complete as of Sunday while clear skies and unseasonably hot U.S. weather is helping to ensure good progress this week.

Dealers also said some market participants had already begun to scale back positions ahead of Friday's USDA quarterly stocks report.

Analysts expect U.S. corn stocks as of Sept. 1 to be pegged at 2.353 billion bushels, which would be the largest Sept. 1 stocks since 1988, if realized.

Wheat prices were also lower with the CBOT's most active contract down 0.9 percent at $4.49-3/4 a bushel.

Dealers said the strength of the dollar was adding to downward pressure on prices, potentially curbing export demand.

"We suspect farmers and traders still have plenty of wheat to sell. Moreover the U.S. dollars gains at least raise a question. The good news on exports will only last while US wheat is competitively priced," said analyst Tobin Gorey of Commonwealth Bank of Australia.

December wheat in Paris fell 0.45 percent to 165.75 euros a tonne, with the market underpinned by the weakness of the European currency which fell to a one-month low on Wednesday against the resurgent dollar.

"The drop of the single currency is a way to improve our competitiveness on exports markets, which is crucial at the time Algeria is launching a wheat tender," analysts Agritel said in a market note.

Algeria's state grains agency OAIC has issued an international tender to buy optional-origin milling wheat for shipment in December.

The most-active Chicago soybean contract was down 0.2 percent at $9.62 a bushel.

The soybean market is facing pressure after the U.S. Environmental Protection Agency said it was seeking comment on a proposal to reduce biodiesel blending requirements into the domestic fuel supply. Soybean oil is the primary feedstock for biodiesel fuel in the United States. (Additional reporting by Naveen Thukral in Singapore; Editing by Richard Pullin and Jon Boyle)