GRAINS-Wheat rally hits the buffers as US dollar stabilises

CANBERRA, May 22 (Reuters) - A rally in Chicago wheat futures hit the buffers on Thursday, with prices falling from Wednesday's one-month high as the U.S. dollar halted its decline and a Russian consultancy raised its production forecast for the country.

Corn and soybean futures also fell.

FUNDAMENTALS

The most active wheat contract on the Chicago Board of Trade (CBOT) Wv1 fell 0.7% to $5.45-1/2 a bushel at 0154 GMT, with CBOT soybeans Sv1 falling 0.9% to $10.53-1/4 a bushel and corn Cv1 easing 0.5% to $4.58-3/4 a bushel.

CBOT wheat slumped to a five-year low of $5.06-1/4 a bushel on May 13, hurt by ample supply and lacklustre demand from importers.

But a weakening dollar, concerns over adverse weather in Russia and China and an unexpected decline in U.S. wheat ratings triggered a wave of short-covering that drove prices as high as $5.56-1/4 on Wednesday.

A weaker U.S. dollar makes U.S. farm goods more attractive to overseas buyers. The greenback was flat on Thursday. .DXY USD/

That said, traders are not convinced that Chinese or Russian wheat crops have suffered significant damage and the U.S. remains on track for a large harvest.

Consultant Sovecon raised its 2025 Russian wheat production forecast to 81 million metric tons from 79.8 million tons, but warned persistent dryness in many regions could cause crop losses.

"We don't really have a fundamental story to justify sustaining a rally," StoneX analyst Arlan Suderman said.

"But we do have enough potential stories to make end users and fund managers holding large short positions nervous at current price levels," he added.

Commodity funds have been net buyers in six of the last seven sessions, traders say. However, they remained net short overall.

In other crops, Brazil's 2024/25 second corn harvest is estimated at a record 112.9 million metric tons, up 10.5% from the previous season, consultants Agroconsult said.

Dry weather conditions in the coming days will help air out Argentina's muddy fields, the Buenos Aires Grains Exchange said, after heavy storms flooded the already behind-schedule soybean crop.

MARKETS NEWS

Major stock indexes and the dollar fell on Wednesday as investors worried about a deteriorating U.S. fiscal outlook and Treasury yields climbed following a poorly received sale of 20-year U.S. bonds. MKTS/GLOB