GRAINS-Wheat, soy slip after USDA report, corn holds near 7-month top

* USDA cools wheat, soy markets with higher U.S. stocks

* USDA report takes focus away from U.S., Argentine weather

* Corn holds near 7-month high after U.S. stocks cut

* Analysts eye fund flows after recent bout of covering

(Updates with European trading, changes byline/dateline) PARIS/SINGAPORE, March 9 (Reuters) - Chicago wheat and soybeans each dropped 1 percent on Friday after the U.S. government raised its outlook for end-of-season stockpiles of the crops, taking attention away from drought threatening the U.S. and Argentine grain belts. Corn edged down but held close to a seven-month high struck on Thursday when the U.S. Department of Agriculture (USDA) cut projected U.S. corn stocks by more than expected on the back of healthy exports and ethanol demand. The most-active wheat contract on the Chicago Board of Trade was down 1.0 percent at $4.94-1/2 a bushel by 1225 GMT. CBOT soybeans were down 1.0 percent at $10.53 a bushel. Corn edged down 0.2 percent to $3.92-3/4, holding near Thursday's peak of $3.93-3/4, the highest since July 25. "People are digesting the USDA report," Alexandre Boy of consultancy Agritel said. "There weren't a lot of surprises in wheat but it was slightly bearish with the increase in Russian exports that transferred extra stocks to the U.S. and EU." The USDA raised its outlook for global wheat inventory at the end of 2017/18 to a new record, underlining a backdrop of ample supplies. High world supplies were countering support from drought in parts of the U.S. Plains winter wheat belt, which had fuelled a rally in wheat prices in the past month. "On the supply front, even if we assume the U.S. winter wheat yield drops by 10 to 15 percent, there is still a lot of inventory across the world," an India-based commodities analyst said. The USDA data also dampened the soybean market as an upward revision to U.S. stocks, reflecting, as in wheat, a reduction in U.S. exports, took the focus away from a sharp cut to forecast soybean production in drought-hit Argentina. Corn prices, however, drew support from a bigger than expected cut to projected U.S. stocks due to strong demand. Weekly U.S. export data also released on Thursday underscored brisk corn demand, with weekly export sales of 1.9 million tonnes above the range of analyst expectations. Dry weather was set to continue in the U.S. Plains and Argentina's Pampas grain belt in the week ahead, but analysts said it may not be enough to fuel gains after recent rallies. "We'll have to see whether the funds are done with covering their positions in relation to weather risk," Boy said. "The CFTC report this evening is going to be interesting to watch," he added, referring to weekly data on investor positions released by the Commodity Futures Trading Commission.

Prices at 1225 GMT

Last Change Pct End Ytd Pct Move 2017 Move CBOT wheat 494.50 -4.75 -0.95 427.00 15.81 CBOT corn 392.75 -0.75 -0.19 350.75 11.97 CBOT soy 1053.00 -11.00 -1.03 961.75 9.49 Paris wheat May 164.00 -0.50 -0.30 162.50 0.92 Paris maize Jun 164.25 1.00 0.61 163.50 0.46 Paris rape May 347.75 -2.25 -0.64 352.75 -1.42 WTI crude oil 60.58 0.46 0.77 60.42 0.26 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 Naveen Thukral in Singapore and Gus Trompiz in Paris Editing by Joseph Radford and Adrian Croft)