U.S. corn futures rose 1.7 per cent on Tuesday as traders unwound bearish bets on the market ahead of a key government supply report, traders said.
Soybean futures also rose in pre-report positioning, while wheat futures were mixed.
Improving crop conditions and profit-taking weighed on the benchmark Chicago Board of Trade (CBOT) soft red winter wheat contracts, but Kansas City Board of Trade hard red winter wheat edged higher on concerns about a cold snap damaging the developing crop in the U.S. Plains.
Corn's gains were their biggest in a month. The market received additional support from planting delays in the U.S. Midwest as well as talk of burgeoning demand from China.
"It is just technical rebound after hitting a multi-month low on Friday," said Terry Reilly, senior commodity analyst at Futures International. "You are seeing a little bit of short-covering from the new shorts that entered the market after the grain stocks report."
Both corn and soybeans saw front-month contracts gain more than deferred offerings due to firm cash markets.
"The weather, the planting delay potential and the stronger cash basis brought in the short-covering," said Mike Zuzolo, president of Global Commodity Analytics, a farm advisory service in Lafayette, Indiana.
Investors had their biggest short positions in the front-month contracts, Zuzolo said.
CBOT May corn futures settled up 10-3/4 cents at $6.44-1/4 a bushel, their second straight day of gains (all figures US$).
Improving ethanol margins also helped boost corn futures, said Austin Damiani, a broker for Frontier Futures.
CBOT May soybeans were up 17-1/2 cents at $13.95-1/2 a bushel, while CBOT May wheat shed 3-3/4 cents to $7.08-3/4 a bushel. The wheat contract had risen 7.3 per cent in the past week before Tuesday's drop.
U.S. winter wheat condition ratings improved in the latest week but hovered at the lowest level for this time of year since 2002, the U.S. Department of Agriculture's weekly crop progress report showed.
USDA said 36 per cent of the U.S. winter wheat crop was rated in good to excellent condition, up from 34 per cent a week earlier.
"Wheat prices were being supported by harsh U.S. winter, which was hurting the wheat crop," said Joyce Liu, an analyst at Phillip Futures. "With the improvement in wheat crop condition, I think some of those fears have eased."
Rain, snow and a cold snap this week will add moisture to drought-stricken soils in the U.S. Plains and Midwest but will also damage portions of the winter wheat crop and stall corn plantings, said Don Keeney, meteorologist for MDA Weather Services.
USDA will release its monthly supply and demand report on Wednesday at 11 a.m. CT.
"Tomorrow's (USDA) report will confirm or deny the relatively low U.S. stock levels compared to expectations estimated end-March. Meanwhile, the market is prudent and operators are avoiding risk," said Alexis Poullain, analyst with Agritel consultancy.
-- Mark Weinraub covers the grain futures markets from Chicago for Reuters. Additional reporting for Reuters by Sam Nelson in Chicago, Sybille de la Hamaide in Paris and Naveen Thukral in Singapore.