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CHICAGO (Reuters) - Wheat futures rose 1.6 percent at the Chicago Board of Trade on Thursday on heavy short covering after pressure from a firm dollar pushed prices to their lowest level in more than a week early in the session, traders said.
"It looked like wheat was trying to find a little bit of a bottom," said Jason Britt, analyst with Central States Commodities. "The market had gotten a little bit oversold, a little bit overdone."
Wheat rallied despite warm and wet weather in the U.S. Plains that boosted prospects for this year's crops. Some traders warned that the early emerging winter wheat crop was vulnerable to damage from a freeze should temperatures buck forecasts and drop sharply in the coming weeks.
Corn futures also closed higher as traders unwound their soybean/corn spreads as wheat prices climbed. Better-than-expected export demand for both corn and wheat added further strength to the market.
CBOT soybeans fell, hampered by disappointing exports and fears that economic concerns will slash demand from top soy buyer China, traders said.
China's economic momentum slowed in March as factory activity shrank for a fifth straight month, according to the HSBC flash purchasing managers index, the earliest indicator of China's industrial activity.
CBOT May wheat settled up 10 cents at $6.46-1/4 a bushel. The gain for the benchmark contract was the biggest in percentage terms since March 15.
CBOT May corn gained 2-1/2 cents to close at $6.44-1/2 a bushel.
"Corn and wheat seem to be finding a little stability," said Bill Gentry, a broker for Risk Management Commodities. "I think (they) are trying to regain their composure."
CBOT May soybeans dropped 5-1/2 cents to $13.49-1/2 a bushel. Soybeans have fallen in three of the last four days, setting back from a four session winning streak last week.
A weekly U.S. Agriculture Department report showed that export sales of soybeans were just 587,311 tons, the lowest in seven weeks and below the low end of trade estimates for 900,000 to 1 million tonnes.
"I think the export sales were very disappointing," said Mike Zuzolo, analyst for Global Commodity Analytics in Indiana. "That HSBC PMI and the export sales go hand in hand with the trade psychology."
Weakness in the crude oil market added to the pressure on the soybean market but losses stabilized as some bargain buyers saw the early drop as an opportunity to make some purchases in a market that has risen 13.1 percent so far this year.
USDA's export sales report showed export sales of corn at 917,100 tonnes, the largest in five weeks. Analysts had been expecting corn export sales between 650,000 and 850,000 tonnes.
Wheat export sales of 541,300 tonnes topped trade expectations of 400,000 to 500,000 tonnes.
Rainfall moved through portions of the Midwest, delaying early spring fieldwork but also adding valuable soil moisture ahead of the 2012 corn, soybean and spring wheat planting season, said Andy Karst, meteorologist for World Weather Inc.
Karst also said that beneficial rain fell in previously dry areas of western Kansas and the Texas Panhandle, key growing areas for hard red winter wheat.
"The crop should be in pretty good shape and grow rapidly," he said. "There is no threat of freeze damage anywhere in the Plains or Midwest."
Forecasts for a turn to cooler and wetter weather around the U.S. Midwest in early April that could slow planting also helped corn futures on Thursday, Zuzolo said.
Prices at 2:44 p.m. EDT
CHG CHG CHG CBOT corn 642.00 3.25 0.5% -0.7% CBOT soy 1355.00 -4.00 -0.3% 13.1% CBOT meal 370.10 0.30 0.1% 19.6% CBOT soyoil 53.96 -0.42 -0.8% 3.6% CBOT wheat 636.25 10.25 1.6% -2.5% CBOT rice 1440.50 6.00 0.4% -1.4% EU wheat 210.25 1.50 0.7% 3.8%
US crude 105.49 -1.79 -1.7% 6.7% Dow Jones .DJI 13,048 -76 -0.6% 6.8% Gold 1641.59 -8.36 -0.5% 5.0% Euro/dollar 1.3179 -0.0026 -0.2% 1.8% Dollar Index .DXY 79.7290 0.0780 0.1% -0.6% Baltic Freight .BADI 902 6 0.7% -48.1%
* In U.S. cents, benchmark contracts, except EU wheat (euros) and soymeal (dollars). CBOT wheat, corn and soybeans per bushel, rice per hundredweight, soymeal per ton and soyoil per lb.
Additional reporting by Sam Nelson; Editing by Marguerita Choy and Alden Bentley