GRAINS-Soybeans hold firm with little respite for parched Argentina

* Soybean prices hold near highest since July 2016

* Argentina drought still the focus

* Wheat edges up after Friday pullback, dry U.S. Plains support

(Updates with European trading, changes byline/dateline) PARIS/SYDNEY, March 5 (Reuters) - Chicago soybean futures edged higher on Monday, holding near their highest since July 2016, as weather forecasts showed little rain relief ahead for drought-affected grain belts in major exporter Argentina. Gains were modest, with a strong dollar and uncertainty over U.S.-China trade relations encouraging the oilseed market to consolidate after last week's rally. Wheat was also steady, halting Friday's 3 percent drop, as drought in the U.S. plains underpinned prices for the cereal. Corn was almost unchanged. The most active soybean futures on the Chicago Board of Trade were up 0.2 percent at $10.73-1/4 a bushel at 1251 GMT. In the previous session it reached $10.82-1/2 a bushel, the highest since July 14, 2016. "Above all it is the drought in Argentina that is driving up prices. The Argentinian crop is set to be the worst in six years," Commerzbank analysts said in a note. The deepening drought in the Pampas grain belt has led forecasters to cut estimates for the forthcoming Argentina soybean crop, prompting investors to raise their long position in Chicago futures. Private analytics firm Informa Economics on Friday cut its forecast for Argentina's 2017/2018 soybean harvest by 7 million tonnes to 44 million tonnes.

But analysts have also set an expected drop in Argentine output against a bumper crop being harvested in Brazil and the risk that international trade tensions could disrupt massive Chinese imports of U.S. soybeans. U.S. President Donald Trump announced last week that he would impose hefty tariffs on imported steel and aluminum to protect U.S. producers, risking retaliation from major trade partners such as China, Europe and neighboring Canada. "Soybeans remain the focus as supply tightens," said Tobin Gorey, director of agricultural strategy at Commonwealth Bank of Australia. "The founder of the New Hope Group, one of China's biggest pig-breeding companies, said so on Friday. But he also said they will have to find alternative feed sources if U.S. soybeans become ensnared in the dispute." The most active CBOT wheat futures climbed 0.3 percent to $5.01-1/4 a bushel. They had closed 3 percent down in the previous session in a pullback after touching their highest level since last July at $5.18-1/2. Chicago corn was unchanged on the day at $3.85-1/4 a bushel. World shares slipped for the fifth straight day on Monday, curbed by the prospect of the global trade spat and political instability in Europe after Italy's inconclusive election at the weekend.

Prices at 1251 GMT

Last Change Pct End Ytd Pct Move 2017 Move CBOT wheat 501.25 1.25 0.25 427.00 17.39 CBOT corn 385.25 0.00 0.00 350.75 9.84 CBOT soy 1073.25 2.25 0.21 961.75 11.59 Paris wheat Mar 165.00 1.50 0.92 159.00 3.77 Paris maize Mar 152.25 -3.50 -2.25 157.75 -3.49 Paris rape May 354.25 -1.00 -0.28 352.75 0.43 WTI crude oil 61.25 0.00 0.00 60.42 1.37 Euro/dlr 1.23 0.00 -0.12

Most active contracts - Wheat, corn and soy US cents/bushel, Paris futures in euros per tonne

(Reporting by Colin Packham in Sydney and Gus Trompiz in Paris Editing by Sherry Jacob-Phillips and David Goodman)