* Traders hoped for more progress on U.S.-China trade
* China is world's top soybean importer
* U.S. rains add pressure to wheat futures
(New throughout, updates prices, market activity and comments to close; adds details on fund selling) CHICAGO, May 4 (Reuters) - U.S. soybean futures fell on Friday on disappointment that trade talks did not move Washington and Beijing closer to a deal to resolve the mounting dispute that has crimped U.S. crop sales to China. Prices retreated after a 1 percent rise on Thursday that was fueled by "unfounded rumors" the world's top two economies had struck a trade deal, according to Tomm Pfitzenmaier, analyst for Summit Commodity Brokerage in Iowa. China's Xinhua news agency said disagreements between the nations remained "relatively big" after the conclusion of U.S.-China trade discussions on Friday. U.S. farmers hope for a quick resolution to the conflict after China last month threatened tariffs against a range of U.S. goods, including a 25 percent duty on soybeans. Over the past decade, burgeoning demand from China has fueled a sharp rise in production of U.S. soybeans, set to overtake corn as the country's most widely planted crop for the first time in 35 years. Soybeans were the most valuable U.S. agricultural export to China last year, worth $12 billion. However, U.S. soybean sales to China over the last four weeks are down 10 percent from a year ago, according to U.S. trade figures. This is a blow to farm country, which helped boost President Donald Trump into office in the 2016 election.
"Yesterday everybody went home with the idea that this trade dispute with China was wrapped up," said Karl Setzer, risk management team leader for MaxYield Cooperative in Iowa. "We went from one side back to the other."
The most actively traded soybean contract slid 16-1/2
cents, or 1.6 percent, to $10.36-3/4 a bushel at the Chicago Board of Trade.
The losses weighed on the corn market , which pulled
back 1-3/4 cents, or 0.4 percent, to $4.06-1/4 a bushel after matching a nine-month high reached on Thursday.
The most-active wheat contract lost 11-3/4 cents, or
2.2 percent, to $5.26-1/4 a bushel due to technical selling and rains that eased concerns about dryness hurting the crop in the U.S. Plains. Scouts on an industry tour on Thursday projected that drought-hit Kansas, the top U.S. wheat-growing state, may produce its smallest crop since 1989. "We know it's going to be a smaller crop," Setzer said. "The trade all of a sudden begins to think, 'Has it lost that much?"' Commodity funds were net sellers of an estimated 11,000 soybean contracts, 9,000 wheat contracts and 6,000 corn contracts.
(Additional reporting by Gus Trompiz in Paris and Naveen Thukral in Singapore; editing by David Goodman and David Gregorio)