GRAINS-Soybeans ease on doubts over US-China trade progress

PARIS/CANBERRA, Oct 10 (Reuters) - U.S. soybean futures fell for a second session on Friday as trade restrictions announced by China cooled hopes of a resolution to a standoff with Washington that has halted soybean shipments.

Corn and wheat also eased, with a drop in crude oil LCOc1 and a two-month high for the dollar index =USD also weighing on the market.

The most-active soybean contract on the Chicago Board of Trade (CBOT) Sv1 was down 0.7% at $10.14-3/4 a bushel at 1138 GMT.

The soybean market is wrestling with the absence of Chinese purchases of the new U.S. crop amid the two countries' wider trade war.

China's expansion of export controls on rare earth metals on Thursday, followed on Friday by Beijing's announcement of retaliatory port fees on vessels owned or operated by U.S. interests, dampened expectations of progress to settle the countries' trade dispute.

"It's a reminder that China still holds leverage and is unlikely to accept all U.S. terms easily," commodity data firm CM Navigator said in a note.

U.S. President Donald Trump reiterated on Thursday that he would raise the issue of soybeans with his Chinese counterpart Xi Jinping at a meeting later this month.

"There's still plenty of downside there if that meeting doesn't play out in a positive way," said Sean Hickey, an analyst at Bendigo Bank Agribusiness in Australia.

Soybeans and corn had drawn some support earlier in the week from reports of U.S. harvest yields below the most recent U.S. Department of Agriculture forecast.

Soybeans peaked at $10.30, the highest since September 19.

But with the USDA's latest monthly forecast postponed due to a partial government shutdown, traders were cautious about interpreting harvest reports.

Broadly favourable weather for Midwest harvesting and beneficial rain for planting in Brazil also curbed the markets.

The government shutdown has also forced the Trump administration to delay planned aid for farmers affected by the loss of soybean export sales to China.

CBOT corn Cv1 was down 0.2% at $4.17-1/4 a bushel. CBOT wheat Wv1 was down 0.4% at $5.04-1/2 a bushel to remain near a five-year low of $5.00-3/4 from mid-August.

Wheat briefly rallied on Thursday, supported by news of a Russian strike on port facilities in Ukraine, and a Russian government estimate that the country's farmers could reduce wheat planting by over 6% for next year's harvest.

But record projected global supply, including large harvests expected in Argentina and Australia in the coming weeks, hung over the wheat market.