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GRAINS-Hot, dry weather outlook sparks rally in U.S. corn, soy, wheat

(Updates with U.S. trading, adds new analyst quote, details, byline; previous PARIS/SINGAPORE)

By Mark Weinraub

CHICAGO, June 1 (Reuters) - U.S. corn, soybean and wheat futures rallied on Tuesday, supported by concerns that crops will face stress from adverse weather during the next few weeks.

"The grains exploded out of the gates last night and remain double-digits higher ... as forecasts turn hot and dry through mid-month," Arlan Suderman, chief commodities economist at StoneX, said in a note to clients.

Reduced crop expectations in South America added support.

AgRural, a Brazilian agribusiness consultancy, on Tuesday announced a forecast reduction for the country's second corn crop because of a severe drought, adding that yields are expected to touch a five-year low this season.

A rally in crude oil also bolstered crop markets by raising the prospect of stronger demand for biofuel.

At 11:03 a.m. CDT (1603 GMT), Chicago Board of Trade July corn futures were up 26 cents at $6.82-3/4 a bushel.

CBOT July soybeans were 13-1/2 cents higher at $15.44 a bushel and July soft red winter wheat was 23-3/4 cents higher at $6.87-1/4 a bushel.

Persisting dryness in northern U.S. and Canadian crop belts could be accentuated by hot weather forecast later this week, threatening to stress much of the spring wheat crop and some corn and soybean crops.

"There is dry weather in the United States and Canada," said Ole Houe, director of advisory services at brokerage IKON Commodities in Sydney.

"There are doubts around wheat crop in Canada and U.S. corn yields."

MGEX spring wheat for July delivery was 37-1/4 cents higher at $7.64-3/4 a bushel.

The Commodity Weather Group (CWG) said in a daily note that over one-third of U.S. spring wheat could see stress rebuild in the next two weeks, with around 15% of corn and soybeans seen at risk from dryness. (Reporting by Mark Weinraub; Additional reporting by Gus Trompiz in Paris, Naveen Thukral in Singapore and Colin Packham in Canberra; Editing by Bernadette Baum and Lisa Shumaker)

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