GRAINS-Soy to 3-1/2 week top on short-covering, dry U.S. forecast

* Midwest dryness seen threatening U.S. soy yield prospects

* Soybeans also buoyed by hopes for strong U.S. exports

* Corn and wheat follow soybeans higher

(New throughout; updates prices, adds quotes, changes byline, changes dateline from previous HAMBURG) CHICAGO, Sept 5 (Reuters) - U.S. soybean futures hit a 3-1/2 week high on Tuesday on a mix of technical buying and forecasts for dry weather in the Midwest that could threaten late-season yield prospects, analysts said. Corn and wheat futures followed the higher trend. As of 12:46 p.m. CDT (1746 GMT), Chicago Board of Trade November soybean futures were up 17 cents at $9.66-1/2 per bushel after reaching $9.73-1/2, its highest since Aug. 10. CBOT December corn was up 2-1/2 cents at $3.57-3/4 per bushel and December wheat was up 6 cents at $4.44-3/4 a bushel. Soybeans led the way up, with the November contract forming a gap on its chart by opening above Friday's high, a bullish technical signal. "There is a lot of short-covering. Funds came into the week short, and we went above ... resistance, and hit a lot of buy-stops on the way up," said Brian Hoops, analyst with Midwest Market Solutions. Weather forecasts called for dry conditions across much of the Midwest over the next 10 days, potentially stressing the maturing U.S. soybean crop. "The dry weather will favor maturation of the corn crop but may stress soybean filling, especially in Iowa and Illinois, preventing soybean yields from reaching their full potential," MDA Weather Services said in a note to clients. Illinois and Iowa are the top two soy-producing states. Additional support stemmed from stepped-up export demand from top global soy buyer China. The U.S. Department of Agriculture on Tuesday said private exporters sold 136,000 tonnes of U.S. soybeans to China, following a string of similar sales announcements since mid-August. "Export hopes are helping to support soybeans today, with U.S. soybeans looking competitive," Matt Ammermann, commodity risk manager at INTL FCStone, said. "Strong demand has been present from China for some time and if new Chinese demand comes in big style, it will be the U.S. that will probably be the seller." Uncertainty about the path of Hurricane Irma may have added light support. The storm could potentially bring heavy rain to the Southeast next week, MDA said. "I don't know if that (means) anything in particular to beans, but it adds another level of uncertainty," said Terry Linn of Linn & Associates in Chicago. CBOT corn futures followed soybeans higher, extending a rebound from contract lows set in nearby months last week. Cash sales of old-crop corn from farmers have slowed since the start of the month, helping to support futures, Hoops said. "I think we've put the worst behind us as we've gotten through deliveries and a lot of old-crop sales being made in the late August-early September time frame," Hoops said.

CBOT prices as of 12:44 p.m CDT (1744 GMT):

Net Pct Volume

Last change change

CBOT wheat WZ7 444.75 6.00 1.4 54386 CBOT corn CZ7 358.00 2.75 0.8 113262 CBOT soybeans SX7 966.50 17.00 1.8 130132 CBOT soymeal SMZ7 307.10 8.30 2.8 55943 CBOT soyoil BOZ7 35.51 -0.16 -0.5 65944

NOTE: CBOT September wheat, December corn and November soybeans shown in cents per bushel, December soymeal in dollars per short ton and December soyoil in cents per lb.

(Additional reporting by Michael Hogan in Hamburg and Naveen Thukral in Singapore; editing by David Clarke and Lisa Shumaker)