GRAINS-U.S. market up as gov't returns to work and dollar drops
* Falling dollar supportive to grains and soy
* Chinese demand underpins U.S. soybean futures
* Canada wheat exports threatened by possible rail strike
(Adds analyst comments, updates prices, changes dateline from LONDON/SINGAPORE)
CHICAGO, Oct 17 (Reuters) - U.S. wheat, corn and soybean futures rose on Thursday in a relief rally and bargain buying as the U.S. government returned to work and the dollar index fell.
"The dollar being down this much created a tailwind for everything including grains but grains still aren't fully reflecting the extent of the dollar's decline," said Sterling Smith, futures specialist for Citigroup.
The U.S. dollar index was down a full percentage point at 9:20 a.m. CDT (1420 GMT) on Thursday and gold was up more than $35 per ounce.
Traders were busy digesting news from the U.S. Department of Agriculture on Thursday following the back-to-work order from U.S. government officials.
USDA said it was cancelling a delayed release of the October crop production report that had originally been scheduled for Oct. 11 because there has not been enough time to gather necessary data. The next USDA crop report is scheduled to be released on Nov. 8.
At 9:37 a.m. CDT (1437 GMT), Chicago Board of Trade (CBOT) December wheat was up 9-1/2 cents per bushel at $6.91, December corn was up 1-3/4 at $4.44-1/2 and November soy was up 10-1/2 cents at $12.87.
Smith said some delays this week in harvesting the U.S. corn and soybean crops also lent a modest amount of short-term support to corn and soybeans.
Light showers from now into the weekend in portions of the Midwest will cause only minor delays in harvesting the 2013 U.S. corn and soybean crops, an agricultural meteorologist said on Thursday.
"There will be a few light showers today in the southern Midwest and by Saturday they will move to the eastern Midwest. Amounts will be very light from 0.10 to 0.25 inch or less so there will be only some brief delays from the showers," said Don Keeney, meteorologist for MDA Weather Services.
Wheat also may have garnered support from a threatened rail strike in Canada that could hamper Canadian wheat exports and shift some business to the United States, traders said.
Gains in corn and soybeans were slowed by harvesting of a likely record large U.S. corn crop and the fourth-largest soybean crop ever.
Strong demand from China was also supportive to wheat, corn and soybean futures.
"We are looking at very good soybean production prospects coming out of Brazil but at the same time we are hearing talk that China has been purchasing volumes of U.S. beans in recent days," said Luke Mathews, a commodities strategist at the Commonwealth Bank of Australia.
China's soybean imports are likely to rebound in the coming months after a sharp decline in September.
China, which accounts for 60 percent of soybeans traded in the world, has been facing tight supplies of protein-rich feed ingredient soybean meal after an unexpected recovery in demand.
Dealers were keeping a close watch on Canada because of the possible railway strike, which could limit short-term availability from the key wheat exporter.
"The outstanding wheat crop in Canada is likely to help compensate for losses in other countries such as China, the Black Sea region and Brazil," Commerzbank said in a market note.
"In the short term, however, the increased supply from Canada may not be available due to the threat of a strike by Canadian rail workers."
(Additional reporting by Nigel Hunt in London and Naveen Thukral in Singapore; editing by Muralikumar Anantharaman, Keiron Henderson and Matthew Lewis)