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.

The most active wheat contract on the Chicago Board of Trade (CBOT) Wv1 was down 0.6% at $5.46 a bushel at 0720 GMT, with CBOT soybeans Sv1 falling 0.4% to $10.58-1/4 a bushel and corn Cv1 easing 0.5% to $4.58-3/4 a bushel.

Wheat slumped to a five-year low of $5.06-1/4 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 rose slightly on Thursday. .DXY USD/

"People are starting to notice just enough things to say hold on, there's been no risk premium built into these wheat prices," said an analyst at a grains trader in Australia.

"There's still plenty that could go wrong before (northern hemisphere) harvests hit their peak," they said.

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 still cause crop losses.

Commodity funds hold a large net short position in CBOT wheat but have been net buyers in six of the last seven sessions, traders say.

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 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.