GRAINS-Chicago wheat rallies to one-month high, corn and soybeans extend gains

By P.J. Huffstutter

CHICAGO, May 21 (Reuters) - Chicago wheat futures extended gains on Wednesday to reach a one-month high, supported by a weaker dollar and short-covering encouraged by production concerns, market analysts said.

The strongest gains were seen in the Minneapolis and KC wheat markets, amid questions about crop damage in China and Russia, overall Northern Hemisphere harvest prospects and signs of increased global wheat demand, said Mike Zuzolo, president of Global Commodity Analytics.

Corn rose to a two-week high, following wheat, as traders keep a tight watch on the progress of the U.S. crop set to be harvested this fall.

One reason is the global corn stocks-to-use ratio for the upcoming marketing year is projected to be the tightest since severe drought across the Midwest ravaged fields in 2012, which sent grain prices soaring, market analysts said.

Soybeans rose to a nearly one-week high, supported by fears that heavy rains may have damaged soy crops in Argentina - the largest exporter of soymeal.

"Funds are in a short-covering mindset right now," Zuzolo said.

The Chicago Board of Trade most-active wheat contract Wv1 was up 1.51% at $5.54-1/4 a bushel at 1645 GMT, after reaching $5.56-1/4, its highest since April 21.

The contract had rallied 3.2% on Tuesday as an unexpected decline in U.S. wheat crop ratings and reports of adverse weather in China and Russia triggered short-covering by investors, after prices hit a five-year low last week.

CBOT soybeans Sv1 rose 1.09% to $10.64-1/2 a bushel and corn Cv1 was up 1.38% to $4.60-3/4 a bushel.

Grain and oilseed futures gained support from the U.S. dollar's =USD weakness, after cautious remarks about the U.S. economy by Federal Reserve officials. USD/ A weaker dollar can make U.S. supplies cheaper in export markets.