GRAINS-Soybeans set for third weekly gain on U.S.-China trade hopes

Gus Trompiz and Naveen Thukral

* U.S.-China initial trade deal fuels soy demand expectations

* Hopes tempered by S. America crops, swine flu impact

* Corn, wheat also firm, set for second straight weekly rise

(Updates with European trading, changes byline/dateline) PARIS/SINGAPORE, Dec 20 (Reuters) - Chicago soybean futures ticked higher on Friday, staying on course for a third consecutive week of gains as demand prospects created by a U.S.-Chinese trade deal continued to underpin prices of the oilseed. Corn and wheat edged higher, heading for a second straight weekly gain as the cereal markets also found support in overseas demand. Gains remained moderate as traders remained cautious about to what extent China would increase imports of U.S. crops under its first-stage trade agreement with Washington, while beneficial weather for South American corn and soy crops were also capping U.S. prices. The most-active soybean contract on the Chicago Board of Trade (CBOT) was up half at cent at $9.25 a bushel by 1247 GMT. It was holding near Tuesday's five-week high of $9.31 and set for a third straight weekly rise. U.S. Treasury Secretary Steven Mnuchin said on Thursday the United States and China would sign at the beginning of January their "Phase 1" trade deal, which includes a commitment by Beijing to increase imports of U.S. agricultural products.

Soybeans are the most valuable U.S. crop export to China and shipments have been disrupted by the countries' trade row. Chinese importers bought at least two cargoes of U.S. soybeans after receiving another round of tariff-free quota for U.S. shipments on Tuesday, traders in both countries said.

"The trade war had certainly depressed soybean prices," said Phin Ziebell, agribusiness economist at National Australia Bank. "But we are unlikely to see strong gains as there are expectations of abundant supplies early next year. Brazilian crop is looking absolutely monster, Argentina has had favorable weather and African Swine Fever is curbing Chinese demand." Washington has projected that Chinese purchases of U.S. farm goods under the trade deal would climb to $40 billion to $50 billion annually over the next two years, compared with $24 billion before the countries' trade dispute. Some traders doubt that forecast but Chinese agriculture consultancy JCI said on Friday it expects China to reach imports of than $40 billion per year of U.S. agricultural products.

However, the arrival of newly harvested South American soybeans on the market in early 2020 could limit short-term Chinese demand for U.S. supplies, traders say. Argentine soy planting advanced 8.9 percentage points over the last week, reaching 70.2% of the expected sowing area thanks to rains that relieved dry conditions, the Buenos Aires Grains Exchange said on Thursday. Brazil's 2019/2020 soybean crop could reach a record 122.7 million tonnes, according to the average forecast in a Reuters survey of 16 market analysts carried out earlier this month.

Prices at 1247 GMT

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

(Reporting by Gus Trompiz in Paris and Naveen Thukral in Singapore Editing by Chizu Nomiyama)