* Export demand supports soy, USDA confirms more sales
* Short covering lifts corn, big crop outlook caps gains
* Market turning focus to USDA crop report due Friday (Updates with closing prices)
By Karl Plume
CHICAGO, Aug 8 (Reuters) - U.S. soybean futures rose to a one-week peak on Monday on strong export demand and drier-than-expected Midwest weather over the weekend, although forecasts for a bumper U.S. harvest this autumn limited gains.
Corn futures edged higher on short covering following recent declines, while wheat prices were narrowly mixed.
Some traders squared positions in grain markets ahead of a monthly U.S. Department of Agriculture crop report due on Friday. The government is broadly expected to increase its U.S. corn and soy production forecasts.
"We had some short covering in the overnight session and this morning, but we've given a lot of it back," said Karl Setzer, analyst with MaxYield Cooperative.
"People are squaring positions ahead of the report on Friday. Everybody is expecting higher yields on corn and soybeans, but the question is just how much bigger," he said.
Robust export demand kept a floor under corn and soybean prices as the USDA on Monday announced large sales of both commodities via its daily reporting system. Monday's 246,000-tonne soybean sale to China was the ninth daily sales announcement in nine trading days.
Meanwhile, a large export-inspections total last week, according to USDA data released early on Monday, underscored continued strong demand for old-crop supplies.
Top global soy buyer China imported 7.76 million tonnes of soybeans in July, up 2.6 percent from 7.56 million tonnes in June, figures from the General Administration of Customs of China showed.
Chicago Board of Trade November soybeans rose 10-1/2 cents, or 1.1 percent, to $9.85 a bushel, while CBOT December corn was 1/2 cent higher at $3.34-3/4 a bushel.
Mostly favorable crop weather in the U.S. Midwest has kept a lid on prices as corn and soybean crop ratings remained near historic highs.
Analysts, on average, expect the USDA to slightly lower its corn condition rating in a report due later on Monday while keeping its soy crop condition rating unchanged.
CBOT September wheat was a penny higher at $4.17 per bushel, while deferred contracts eased as commodity index funds rolled short positions forward. The spot contract was also supported by recent cancellations of deliverable CBOT wheat registrations.
A stronger U.S. dollar hung over the wheat market because it makes shipments from the United States more expensive for those holding other currencies. (Additional reporting by Colin Packham in Sydney, Nigel Hunt in London; Editing by Jonathan Oatis and Steve Orlofsky)