UPDATE 1-Canada hopes NAFTA talks go on to next round; some progress made

(Adds officials closing a chapter, new quote from Canada's chief negotiator, comments by Canadian food industry lobbyist)

MONTREAL, Jan 27 (Reuters) - Officials trying to hammer out differences over how to update the North American Free Trade Agreement have made some progress and hope politicians decide the talks should continue, Steve Verheul, Canada's chief negotiator, told Reuters on Saturday.

The United States, Canada and Mexico are due to finish the sixth of seven planned rounds of NAFTA discussions on Monday, with several major issues far from being resolved.

U.S. President Donald Trump, who describes the $1.2 trillion pact as a disaster, has frequently threatened to walk away from it unless major changes are made.

U.S. Trade Representative Robert Lighthizer, Canadian Foreign Minister Chrystia Freeland and Mexican Economy Minister Ildefonso Guajardo will hold a news conference later on Monday to announce the next steps.

Asked whether he thought the three ministers would decide there is enough momentum to continue with the next round, Verheul said: "Well, that's our hope."

Later in the day, he told reporters: "We're moving in a slightly more positive direction. We'll take that encouragement where we can."

Work is moving ahead on less-contentious parts of NAFTA, a Canadian source close to the talks said on Saturday, and the three nations have closed a chapter on measures to fight corruption.

Canada and Mexico initially dismissed some of the main U.S. demands as unworkable but later made it clear they were ready to be more flexible.

During the sixth round, Canada raised what it called creative ways of meeting U.S. demands for higher North American content in autos and a sunset clause that would allow one party to quit the treaty after five years.

"I think we have demonstrated we have engaged on most of the big issues," Verheul said in his remarks to Reuters. "We've made progress on some of the smaller ones, so I think (it was) not a bad week."

Speaking separately, a second Canadian government source said Ottawa was cautiously optimistic about the round, given that the U.S. side had not summarily rejected the proposals for compromise.

But the source, who requested anonymity because of the sensitivity of the situation, said much would depend on Lighthizer's reaction on Monday.

Markets and industries are worried about the possible collapse of the $1.2 trillion pact.

"It's unclear to us that anything that anyone does here will be enough ... which is concerning for agriculture," said Brian Innes, president of the Canadian Agri-food Trade Alliance.

The talks were initially scheduled to wrap up by the end of March to avoid clashing with Mexico's presidential election in July. Guajardo told Reuters on Friday that the process could be extended if need be.

Andres Manuel Lopez Obrador, the leftist front-runner in the presidential race, said on Friday that the renegotiation should wait until after the election so that the next government, which he aims to lead, would get a say in the treaty's future. (Reporting by David Ljunggren; Editing by Lisa Von Ahn)