GRAINS-Wheat extends gains as crop rating drop spurs short-covering

CANBERRA/PARIS, May 20 (Reuters) - Chicago wheat futures rose on Tuesday to a near two-week high as a weaker dollar and unexpected decline in U.S. crop ratings encouraged more short-covering after prices hit a five-year low last week.

Corn futures tracked wheat higher while soybeans were almost unchanged as traders assessed crop prospects and awaited further pointers on the impact of U.S. tariffs on demand.

The most active wheat contract on the Chicago Board of Trade (CBOT) Wv1 was up 1.7% at $5.38 a bushel at 1200 GMT. The benchmark earlier touched its highest since May 7 at $5.39 as it continued to recover after falling to its lowest in nearly five years at $5.06-1/4 on May 13.

The recent price drop has stirred international demand, including higher than expected U.S. export sales last week, though competitive Black Sea prices observed in Algerian and Saudi import tenders in the past week have tempered market sentiment. GRA/TEND

In a weekly report issued after Monday's close, the U.S. Department of Agriculture rated 52% of the U.S. winter wheat crop in good to excellent condition, down 2 percentage points from last week and missing an average analyst expectation of an unchanged score.

"The rating is clearly having an effect," a European trader said. "You have some shorts who want to cover themselves."

The USDA's rating for winter wheat was still the highest for this time of year since 2020 and more rain forecast in the week ahead in the central U.S. could help sustain the crop.

Traders were taking a relaxed view of frosts in Russia, with Monday's announcement of a farming emergency by the Rostov region seen as mainly related to fruit rather than wheat.

U.S. wheat remained competitive internationally, helping underpin prices despite favourable harvest prospects in much of the Northern Hemisphere.

"We will retest the (price) low. But, whenever we do, we will find demand," said Ole Houe, head of advisory services at IKON Commodities in Sydney.

The dollar index =USD eased as investors digested concerns about the U.S. economy fanned by Moody's downgrade of the U.S. credit rating late on Friday. A weaker dollar makes U.S. commodities cheaper for overseas buyers.

CBOT soybeans Sv1 inched down 0.02% to $10.50-1/2 a bushel while corn Cv1 added 1.1% to $4.52-1/4 a bushel.

The USDA said U.S. farmers had planted 78% of the nation's corn crop by Sunday, below most analysts' expectations. Soybean planting was 66% complete, slightly above most predictions.

Argentina's agricultural heartland has been lashed by heavy rains in recent days, bringing widespread flooding. The Buenos Aires grains exchange said it could be forced to trim its soybean harvest outlook.