GRAINS-Corn, soybeans sag on renewed U.S.-China trade tension

(Updates with closing CBOT prices, USDA crop progress figures) CHICAGO, May 29 (Reuters) - U.S. corn futures fell about 1.5 percent on Tuesday, with the front contract at times dropping below $4 a bushel as U.S. trade tensions with China re-emerged, analysts said. Wheat turned lower after climbing to multi-month highs, and soybeans also slipped. Chicago Board of Trade July corn settled down 6 cents at $4.00 per bushel after dipping to $3.97-1/2, its lowest since May 18. July wheat ended down 6-1/2 cents at $5.36-1/2 a bushel and July soybeans fell 11 cents at $10.30-1/2 a bushel. Corn tumbled after the United States said it will continue pursuing action on trade with China, days after Washington and Beijing announced a tentative solution to their dispute and suggested that tensions had cooled. China is the world's biggest soybean importer and the top buyer of U.S. sorghum, a feed grain that competes with corn. The news appeared to trigger long liquidation in corn and soybeans, markets in which commodity funds hold net long positions. A stronger dollar added to the negative tone, making U.S. grains less competitive on the world market. "The dollar strength is a real anchor for all the trade. Then you get kicked with the China trade headlines," said Don Roose, president of Iowa-based U.S. Commodities. Also, traders believe the U.S. corn crop is off to a good start, overcoming early planting delays in April. After the CBOT close, the U.S. Department of Agriculture rated 79 percent of the U.S. corn crop as good to excellent, topping a range of analyst expectations and the year-ago rating of 65 percent.

Wheat futures followed corn and soy lower, retreating after the CBOT July contract hit a 10-month high on concerns about dry weather in Russia and elsewhere. Forecasts for beneficial rains in the northern U.S. Plains spring wheat belt and possibly Canada added pressure. Soybeans declined but drew underlying support from transport problems in Brazil, where a truckers' strike has been slow to unwind, even after the government agreed to subsidize diesel prices in a bid to end protests. Soybean exporters are considering declaring force majeure on shipments, a contractual clause that releases them from obligations because of events beyond their control, according to Anec, a trade group representing grains exporters such as Archer Daniels Midland Co and Louis Dreyfus Co. "If it were not for the Brazilian strike woes going on, beans could be much lower than they are," Futures International analyst Terry Reilly said.

CBOT settlement prices:

Last Net Pct Volume

change change

CBOT wheat WN8 536.50 -6.50 -1.2 132759 CBOT corn CN8 400.00 -6.00 -1.5 223187 CBOT soybeans SN8 1030.50 -11.00 -1.1 108111 CBOT soymeal SMN8 380.20 -0.10 0.0 55257 CBOT soyoil BON8 31.21 -0.13 -0.4 44117

NOTE: CBOT July wheat, corn and soybeans shown in cents per bushel, soymeal in dollars per short ton and soyoil in cents per lb.

(Additional reporting by Michael Hogan in Hamburg and Colin Packham in Sydney; editing by Chizu Nomiyama and James Dalgleish)