GRAINS-Corn set for big weekly loss, canola rallies after Canada-China deal

PARIS/CANBERRA, Jan 16 (Reuters) - Chicago corn futures edged higher on Friday but were set for their steepest weekly drop since July, after upward revisions to production estimates underscored abundant global supply.

Wheat and soybeans in Chicago also nudged higher with support from an easing dollar, though ample supply capped gains.

Canadian canola futures, meanwhile, climbed over 2% to a six-week high after Ottawa announced a trade deal with Beijing that will cut Chinese tariffs on Canadian canola.

The most-active corn contract on the Chicago Board of Trade (CBOT) Cv1 was up 0.4% at $4.21-3/4 a bushel at 1215 GMT but down 5.4% from last Friday's close.

Prices tumbled on Monday after the U.S. Department of Agriculture (USDA) pegged U.S. production and inventories above analyst expectations.

The International Grains Council highlighted expectations of plentiful supply on Thursday, raising its 2025/26 global corn production estimate by 15 million metric tons to 1.313 billion tons as part of a projection of record global grain output.

Brisk U.S. exports have helped underpin the corn market, as well as early concerns about dry weather affecting crops in Argentina.

"Luckily the global animal protein sector is performing well and so they are buying more feed grain," said Rabobank analyst Vitor Pistoia.

In oilseeds, canola led price gains, with March canola RSH6 on ICE adding as much as 2.6% to reach its highest since December 3.

An agreement announced by Canadian Prime Minister Mark Carney, under which Beijing is expected to lower tariffs on Canadian canola seed by March 1 to about 15%, could revive stalled Canadian exports to China.

"How quickly China resumes canola imports remains unclear, but any restart would help Canada avoid ballooning stocks," CM Navigator analyst Donatas Jankauskas said.

Elsewhere in the oilseed complex, soybean and soyoil prices steadied after gains on Thursday spurred by news that the U.S. administration plans to finalise by early March this year's biofuel blending quotas, a major source of demand for soyoil.

However, crop agency Conab on Thursday projected record Brazilian soybean output in the 2025/26 marketing year, with harvesting getting under way.

CBOT soybeans Sv1 were up 0.2% at $10.55-1/2 a bushel while CBOT wheat Wv1 was up 0.95 at $5.15 a bushel. Both crops were down slightly over the week.