GRAINS-Corn up on ethanol hopes, Argentina may sell more soy

* Corn up on hopes of more use in ethanol

* Argentina may nationalise grains, prompt farmer selling

* Global recession to pressure corn, soybeans (Updates prices)

SINGAPORE, March 2 - U.S. corn futures rose on Monday, recovering from last week's slide, on hopes that more corn will be converted into ethanol.

But soybeans dropped on the the possibility of Argentine farmers selling their stocks after sources said the government was considering nationalisation of the grains trade.

"With the beginning of a new month, we are starting to see a little bit more capital inflow into commodity markets," said ANZ's agricultural commodities strategist, Doug Whitehead.

"We also had the USDA outlook conference which provided some interesting views on the demand side ... they saw a fairly significant increase in terms of corn use in ethanol."

U.S. farmers will grow the second-largest corn crop on record -- 12.365 billion bushels -- to keep pace with the federal mandate to use more fuel ethanol, the Agriculture Department forecast.

Federal law requires the use of 10.5 billion gallons of ethanol this year and 12 billion gallons in 2010. The USDA said 4.1 billion bushels of corn, or 33 percent of the 2009 crop, will be needed in the marketing year that begins Sept. 1 to satisfy that requirement.

Chicago Board of Trade March corn rose 0.7 percent to $3.53-¼ per bushel, after dropping 3.6 percent in the previous two sessions. March soybeans lost 0.7 percent to $8.68 per bushel and March wheat was up 0.2 percent to $5.11-½ per bushel.

Argentina is considering nationalising the country's grains and cattle markets, a government source said on Friday, a move that would deepen the administration's long-running conflict with the farm sector.

Under the proposal, the government would take over sales and purchases of grains and derived products in the world's No. 2 corn and No. 3 soybean exporter. The state would also intervene in Argentina's cattle market.

"What (President) Cristina Fernandez is doing at the moment is just trying to prompt farmers into selling," Whitehead said.

"The Argentine government is heavily reliant on export taxes for its revenue and at the moment their revenue stream is very much behind schedule. There could be a little bit of pressure from a slight increase in Argentine selling."

Analysts said a severe global recession will continue to erode demand for commodities and weigh on grain markets.

Asian shares fell nearly 4 percent under pressure of mounting evidence of deepening global downturn and fears of ballooning costs of saving struggling U.S. and international financial institutions.

The U.S. economy contracted more sharply than initially estimated in the fourth quarter, government data showed on Friday, as exports plunged and consumers cut spending by the most in over 28 years amid a severe recession. PRICES AT 0722 GMT Contract Last Change Pct chg Day ago pct MA 30 RSI CBOT wheat 511.50 1.00 +0.20% -0.49% 547.84 38 CBOT corn 353.25 2.50 +0.71% -2.42% 369.61 42 CBOT soy 868.00 -6.50 -0.74% -0.14% 949.55 35 CBOT rice $12.40 $0.03 +0.28% +0.49% $12.46 45 WTI crude $43.81 -$0.95 -2.12% -3.12% $40.38 57 Currencies Euro/dlr $1.259 -$0.004 -0.29% -0.60% USD/AUD 0.637 0.000 -0.06% -0.42% (Front month contracts) (Wheat, corn and soy US cents/bushel. Rice: USD per hundredweight)