GRAINS-Soybeans continue recovery on weaker dollar, higher Brazil prices

CANBERRA, April 9 (Reuters) - Chicago soybean futures edged higher on Wednesday, continuing a recovery from four-month lows hit earlier in the week, aided by rising prices in Brazil and a softer dollar, which made U.S. agricultural goods more competitive in global markets.

Corn and wheat futures also gained ground.

The most-active soybean contract on the Chicago Board of Trade (CBOT) Sv1 was up 0.1% at $9.93-3/4 a bushel by 0354 GMT, a third consecutive daily gain.

CBOT corn Cv1 was up 0.1% at $4.69-1/2 a bushel, and CBOT wheat Wv1 rose 0.1% to $5.40-3/4 a bushel, with the U.S. dollar index .DXY weaker for a second day in a row. FRX/

All three CBOT contracts were hit by a tit-for-tat tariff war that erupted last week between the United States and China, but soybeans were hit hardest, slumping as low as $9.69-1/2 on Monday.

China is the world's biggest soy buyer and takes in around half of U.S. soybean exports each year.

Beijing's willingness to retaliate against U.S. tariffs has led to fears of weaker demand for U.S. soybeans and pushed up the soybean basis in Brazil, a rival supplier, StoneX analyst Bevan Everett wrote in a note.

"That has brought the U.S. back to competitiveness," he said. "Other unaffected destinations are finding U.S. values cheaper than Brazil for April shipment."

However, the United States may find it impossible to replace China, said Ole Houe, director of advisory services at IKON Commodities, predicting that Chicago prices would fall further.

"It's relatively easy for China to find beans in South America. It's very hard for the U.S. to find alternative buyers," he said.

Also supporting Chicago soybeans - and corn - was the prospect of increased demand for U.S. biofuel feedstock, following a recommendation from an industry coalition to sharply raise federal mandates for biomass diesel blending in 2026.

Traders were meanwhile positioning themselves ahead of a U.S. Department of Agriculture supply and demand report due for release on Thursday.