U.S. wheat rebounded on Thursday from a nearly nine-month low, while soybeans jumped on better-than-expected weekly export sales and expectations the government will tighten its supply outlook.
Traders were buying back previously sold positions in soybeans amid expectations the U.S. Department of Agriculture, in a monthly crop report on Friday, will cut its estimate for U.S. inventories and its forecast for South American harvests.
"The shorts don't really want to be in the market going into the March report," said Mike Zuzolo, president of Global Commodity Analytics and Consulting.
Chicago Board of Trade (CBOT) March soybeans climbed 1.3 per cent to $15.03-1/2 a bushel. May soybeans rose 0.5 per cent to $14.73-1/2 a bushel (all figures US$).
CBOT May wheat soared 1.7 per cent to $6.95-1/2 a bushel, after sustaining its biggest one-day drop in nearly four months on Wednesday. March wheat surged 1.6 per cent to $6.86-3/4 a bushel after falling to its lowest level in more than eight months in early trading.
Corn stabilized the day after it recorded its biggest daily loss in almost six months. May corn edged up 0.4 per cent to $6.91-1/4 a bushel, having dropped 2.9 per cent on Wednesday.
"We regard the rapid fall in wheat and corn prices as excessive and fundamentally unjustified," Commerzbank said in a note, adding that USDA data is "likely to show that available supply is still tight."
Brazil cuts soy harvest
Analysts polled by Reuters expect USDA, in its crop report, to increase estimates for U.S. wheat and corn supplies slightly from last month and trim its outlook for soybean supplies.
Traders remain nervous about low old-crop supplies of soybeans as logistical problems in Brazil have shifted global buyers from there to the United States.
Brazil's government on Thursday cut 1.6 per cent off its forecast for the 2012-13 soybean crop, citing unfavourable weather. However, farmers are still expected to produce a record harvest.
A large Brazilian harvest is needed to replenish global stocks after drought hurt crops there and in the U.S. last season.
"Tight old-crop supplies should be enough to keep prices supported," said Kayla Burkhart, a broker for SunPrairie Grain.
Larger-than-expected exports helped underpin soy and wheat prices, analysts said.
Weekly U.S. wheat export sales of 828,100 tonnes topped expectations of 350,000 to 550,000 tonnes, while weekly soybean export sales of almost 1.4 million tonnes beat estimates for 900,000 to 1.25 million tonnes.
Corn sales of 156,600 tonnes missed estimates for 450,000 to 650,000 tonnes.
-- Tom Polansek writes for Reuters from Chicago.