"The Iraq news has got people who are short a little anxious," one floor trader said. A senior Iraqi trade official said Iraq on Wednesday would close a long-awaited deal to buy 1 million tonnes of US wheat.
Because Iraq typically buys hard red winter wheat, the news had the biggest impact on hard red winter wheat futures in Kansas City, and KCBT wheat gained ground against Chicago on inter-market spreads.
CBOT December wheat closed up 2-1/4 cents at $3.25-1/2 per bushel but stayed inside of Monday's range. Deferred months were up 1-3/4 to 3 cents.
Volume was on the light side, estimated by the exchange at 28,041 futures and 4,791 options.
Funds bought 2,000 contracts, with Fimat Futures a noted buyer, traders said. Refco Inc and R.J. O'Brien each sold about 1,000 lots.
Disappointing US wheat crop condition ratings helped support prices.
In its first wheat crop ratings of the season, the US Department of Agriculture late on Monday said 57 percent of the US winter wheat crop was rated in good to excellent condition. That was a notable decline from a year ago, when 76 percent of the crop was rated good to excellent.
"It's a little bit of a surprise. The states that didn't do so well, Texas and Arkansas, were drought-affected," said Roy Huckabay, an analyst with the Linn Group.
Crop ratings also lagged in the key soft white wheat states of Oregon and Washington, where conditions have been dry. Ratings were better in the soft red winter wheat belt, including Ohio, Indiana and Illinois.
USDA said the US winter wheat crop was 86 percent planted and 65 percent emerged, ahead of the five-year averages of 84 percent and 63 percent, respectively.
Traders noted some bullish technical signals after a breakdown on Monday, when December wheat fell below $3.26-1/4, a double-bottom on the contract's chart. Support was noted on Tuesday at $3.22-1/2, with resistance at $3.26-1/2.
Monday's decline pushed the nine-day relative strength index for the December contract to 33, near oversold territory. Chartists view an RSI of 30 or lower as one sign of an oversold market, while an RSI of 70 or above signals an overbought market.
Cash basis bids for soft red winter wheat were steady to firm in the US Midwest.