GRAINS-Wheat, soy futures tick lower ahead of USDA report

* Grains consolidate after rally on Argentina, U.S. drought

* Traders cautious before Thursday's USDA crop forecasts

* Investor fears of trade war also keep market subdued (Updates prices, adds comments; changes byline, dateline, previously PARIS/SYDNEY)

CHICAGO, March 7 (Reuters) - Chicago wheat, corn and soybean futures were mostly lower on Wednesday as investors squared up their positions ahead of a monthly U.S. Department of Agriculture report due on Thursday, traders said.

Prices for each crop have cooled from last week's multimonth highs amid dry growing conditions for U.S. wheat and Argentine corn and soybeans.

The USDA in its supply and demand report was expected to forecast larger U.S. wheat ending stocks, due in part to weak export demand, and slightly smaller domestic stockpiles of corn, according to Reuters analyst polls.

"Traders are cautious and less busy close to the USDA report tomorrow, especially after the rally observed these last weeks in Chicago," consultancy Agritel said in a note.

Chicago Board of Trade May wheat was down 3 cents to $5.04 per bushel at 10:54 a.m. CST (1654 GMT), off its nearly eight-month high of $5.18-1/2 from Friday.

CBOT May soybeans were 6-1/4 cents lower at $10.68-1/2 per bushel. Some deferred soybean contracts, including November soy futures, earlier climbed to life-of-contract highs before turning lower.

CBOT May corn was unchanged at $3.88-1/4.

"There is very little fresh news this morning which is limiting any desire to establish new positions," MaxYield Cooperative analyst Karl Setzer said in a note.

Small amounts of precipitation were forecast in parts of Argentina during the next two weeks, according to the Commodity Weather Group.

But the showers may be too late to help some corn and soy fields. Analysts expected the USDA to cut outlooks for both crops in Argentina - losses that may be partially offset by increases in Brazilian soy output.

Adding to the subdued mood in commodity and equity markets was growing concern about a global trade war after the resignation of a free trade advocate from the staff of U.S. President Donald Trump.

Trump's announcement of plans for tariffs on imported steel and aluminium to protect U.S. producers drew threats of retaliation from trade partners. Large flows of U.S. soybeans to China were seen as one market at risk of disruption. (Additional reporting by Gus Trompiz in Paris and Colin Packham in Sydney Editing by Bill Trott)