GRAINS-Corn dips but US heat concerns limit losses

CANBERRA, July 21 (Reuters) - Chicago corn futures fell on Monday after a short-covering rally lifted prices by 3.8% last week, with traders balancing concerns that hot weather will shrink U.S. yields against an overall picture of plentiful supply.

Wheat futures gave back some of Friday's gains and soybeans were down for the first time in four trading sessions as soyoil prices BOc1 dipped from two-year highs.

The most active corn contract on the Chicago Board of Trade (CBOT) Cv1 was down 0.4% at $4.26 a bushel by 0245 GMT, with CBOT soybeans Sv1 falling 0.6% to $10.29-1/4 a bushel and wheat Wv1 0.4% lower at $5.44 a bushel.

All three contracts remain close to multi-month or multi-year lows due to ample supply, but traders fear that forecast heat in the United States could damage corn and soybean production.

Around 7% of global corn supply now faces weather-related threats, including parts of the U.S., Ukraine and Russia, said Tobin Gorey, founder of Cornucopia, a consultancy.

"The coarse grain market has substantial weather worries for the first time this northern summer," he said. "(These) worries are large enough to lift prices, and likely started to do so last week."

U.S. biofuel policy meanwhile means more soybeans are likely to be crushed for soyoil feedstock, and the wind-down of the U.S. winter wheat harvest is easing downward pressure on wheat.

Commodity funds were net buyers of CBOT corn, soybeans and wheat last week, according to traders.

The U.S. Department of Agriculture will issue a weekly update on U.S. crop conditions on Monday.

In France, farmers made more swift progress in harvesting wheat last week but maize field conditions deteriorated further, farm office FranceAgriMer said.