There was nothing in the export arena over the weekend to give wheat futures a lift. USDA put export inspections of US wheat for the week at 17.1 million bushels, down from 21.4 million a week ago.
The Kansas City market led the wheat complex lower on moderate fund selling. The latest Commitments of Traders report from the CFTC on Friday showed funds were still heavily net long in KCBT wheat, prompting some liquidation.
"It may be that the trade was a little surprised the fund was still as long as in Friday's Commitments report," Citigroup analyst Dale Gustafson said.
CBOT December wheat closed down 1-1/4 cents at $3.10 per bushel after grinding to a contract low at $3.08-3/4, below the previous low of $3.10. Deferred months closed down 1-3/4 to up 2 cents.
Volume was estimated by the exchange at 67,064 futures and 4,152 options.
Traders noted moderate spread activity, with funds rolling December positions forward into the March. Traders also noted hedge funds rolling long positions into December 2006.
Chicago wheat had underlying support from oversold technical signals and a net short position held by funds. Friday's CFTC report showed large speculators added to their net short position in CBOT wheat for the week ended November 1.
The nine-day relative strength index for the spot December contract closed at 22. Technical traders view a reading of 30 or lower as a sign of an oversold market.
Private forecaster Meteorlogix said warmer and drier weather over the next several days from Kansas northward would favour growth of the US Plains hard red winter wheat crop. However, crops in Oklahoma and Texas need rain.
Dry weather was also slowing the development of soft red winter wheat in Arkansas, southern Missouri and western Tennessee and Kentucky.
After the markets closed, the US Department of Agriculture said 57 percent of the US winter wheat crop was rated in good to excellent condition, down from 61 percent the previous week.
USDA said the crop was 95 percent planted and 84 percent emerged, ahead of the respective five-year averages of 92 and 80 percent.
Cash basis bids for soft red winter wheat were steady to firm in the US Midwest on Monday, reflecting higher CIF values and dwindling supplies at the US Gulf.