Forexpros – U.S. grain futures edged higher during European morning hours on Wednesday, with corn and soybean prices consolidating just below multi-week highs hit in the previous session.

Meanwhile, wheat futures rose to a three-week high amid concerns over a disruption to Russian supplies.

Agricultural commodities received an additional lift from a broadly weaker U.S. dollar. The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.15% to trade at 81.50.

A weaker dollar boosts the appeal of U.S. crops to overseas buyers and makes commodities more attractive as an alternative investment.

Markets were awaiting the conclusion of a Federal Reserve policy-setting meeting later in the day, amid growing speculation the central bank will move to stimulate growth in the world’s largest economy.

A growing number of Fed watchers expect the central bank to extend its Operation Twist program, in which it sells short-term bonds to buy long-term ones. The current USD400 billion Twist program is set to expire at the end of June.

On the Chicago Mercantile Exchange, corn futures for July delivery traded at USD6.1413 a bushel, easing up 0.2%. The July contract traded in a range of USD6.1463 a bushel, the daily high and a session low of USD6.0938 a bushel.

Prices touched a high of USD6.1675 a bushel on Tuesday, the highest since May 22.

Front-month corn futures have rallied nearly 5% so far this week, as concerns over crop conditions in the U.S. corn-belt boosted sentiment on the grain.

Weekly crop progress data from the U.S. Department of Agriculture showed that the recent adverse weather conditions across the U.S. Midwest and Great Plains-region caused significant damage to corn crops in the area.

According to the USDA, 63% of the U.S. corn crop was rated in ‘good’ to excellent’ condition as of last week, down from 66% the previous week and below the 70% recorded in the same week a year earlier.

Corn prices have been boosted in recent sessions by concerns that dry soil in the U.S. corn-belt could strain the development of crops in the region, just as it enters its key pollination phase in the next few weeks.

Wall Street investment firm Morgan Stanley said in a report Tuesday that corn prices could rally to as high as USD7.00 per bushel, citing dry weather conditions which could elicit a negative production surprise.

The U.S. produced 38% of the world’s corn last year, making it the both world’s largest corn producing nation and the largest exporter of the grain.

Elsewhere, soybeans futures for July delivery traded at USD14.4313 a bushel, gaining 0.65%. It earlier rose by as much as 0.85% to trade at a session high of USD14.4688 a bushel.

Front-month prices touched a high of USD14.5112 on Tuesday, the highest since May 11.

Soy prices advanced, as the same hot, dry weather that boosted corn was seen benefitting soy prices as well.

The USDA said the soybean crop was 56% ‘good’ to ‘excellent’ last week, down from 60% the previous week. Nearly 68% of the crop was ‘good’ to ‘excellent’ in the same week a year earlier.

Meanwhile, wheat for July delivery traded at USD6.5088 a bushel, easing up 0.2%. It earlier rose by as much as 0.4% to trade at USD6.5250 a bushel, the highest since May 31.

Wheat futures tracked strong gains in corn. Wheat and corn prices are linked because both can be used as animal feed.

Prices found further support after influential Russian industry group SovEcon cut its forecast for Russia’s wheat harvest to 50.0 million tonnes, down 3.0 million tonnes from a previous estimate, citing damage from dry weather.

Wheat futures also continued to draw support from expectations of increased demand from China after the nation’s official think-tank revised down estimates on the country’s winter crop to 111.7 million tonnes from a previous forecast of 114 million tonnes.

The downbeat crop outlook raised speculation that China will increase its imports of U.S. wheat to make up for the shortfall.

The Asian nation bought 110,000 metric tons of U.S. soft red winter wheat last week, its largest single purchase of that class of wheat in more than eight years.

Corn is the biggest U.S. crop, valued at USD66.7 billion in 2010, followed by soybeans at USD38.9 billion, government figures show. Wheat was fourth at USD13 billion, behind hay.