GRAINS-U.S. wheat, soybeans hold firm around 1-year highs on China demand hopes

steady export demand, a rally in palm oil prices and dry

hopes@ (Updates with European trading, changes byline/dateline) PARIS/SHANGHAI, Dec 30 (Reuters) - Chicago wheat and soybean prices rose on Monday to stay near their highest levels in over a year as traders anticipated China will expand purchases of U.S. crops under a planned trade deal with Washington. Firm physical markets for wheat around the world, supported weather in South America also lent support to Chicago futures. However, volumes were light in year-end holiday trade and traders were cautious about the strength of the price rally. The most active soybeans futures on the Chicago Board Of Trade were up 0.7% at $9.48-1/2 a bushel by 1235 GMT, close to Friday's peak of $9.50-1/2 that marked an 18-month high. CBOT wheat futures were up 1.2% at $5.62-3/4 a bushel, after earlier setting a new high since August 2018 at $5.63-1/4. Corn was unchanged on the day at $3.90 a bushel, consolidating below a near two-month top of $3.91 struck on Friday. "Grain markets remain steady to higher as traders hold out hope of a China trade deal which will boost U.S. grain exports," U.S. brokerage Allendale said in a note. China, the world's largest consumer of soybeans, and the United States struck a "phase one" trade deal this month to defuse a dispute that has disrupted massive U.S. soybean exports. The agreement includes a commitment by Beijing to increase purchases of U.S. agricultural products, although a formal text has yet to be signed. The initial agreement has also raised expectations of Chinese imports of U.S. corn and wheat, which could add to brisk international demand for wheat. Iran has in recent weeks bought around 1 million tonnes of wheat, mainly Russian, according to traders, while Chinese purchases of European Union wheat this season are also expected to reach about 1 million tonnes. Export prices in Russia, the world's biggest wheat supplier, rose for a seventh straight week last week.

Grain markets were also being supported by recent dry weather in Brazil, the world's biggest soybean exporter. "After a week of widespread dryness, mixed weather (is) expected for Brazil first-crop corn and soybean areas through Jan. 8," Refinitiv Agriculture Research analysts said, noting above-average rainfall expected in the Center West, Southeast and Northeast, and below-average rainfall in Mato Grosso do Sul and the South. A near three-year high for Malaysian palm oil futures also lent support to wider oilseed markets including soybeans.

Prices at 1235 GMT

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

(Reporting by Gus Trompiz in Paris and Emily Chow in Shanghai; Editing by Subhranshu Sahu and Jason Neely)