The report also showed a domestic grains supply build-up with wheat stocks the largest in 20 years, and projected record large South American soy production for 2010. "There was sustained selling last week inspired by the USDA report and today because of a little weakness in dollar, we are seeing some rebound in grains and other commodities," said Garry Booth, a trader with MF Global Australia.
"The markets were oversold and a bounce was expected. We believe funds are still buyers in this market and are expected to remain so." Chicago Board of Trade wheat for March delivery rose 0.7 percent, or 3-1/2 cents, to $5.13-1/2 a bushel by 0318 GMT and March corn gained 2-1/4 cents, or 0.6 percent, to $3.73-3/4 a bushel.
A weak dollar, which encourages investors to buy US commodities as a hedge against inflation, supported the commodity markets. The US dollar drifted lower on Tuesday as equity markets stabilised and worries over Greece's fiscal woes eased just a little, favouring riskier trades in commodities and related currencies.
The dollar index, a gauge of the currency's value against a basket of currencies, fell 0.05 percent. Analysts said the grain markets were also supported by signs of demand in the physical market after steep decline. "There is talk about China inquiring on soybeans and falling wheat prices have prompted fresh inquiry in the cash market," said Booth.
Some strength in the soy market also came from news that rains over the past week have slowed early soybean harvesting in Brazil's No 1 producing state of Mato Grosso, the state's agricultural institute Imea and producers association Aprosoja said. Still, the weather in South America remains largely favourable for soybean and corn crops. CBOT March soybean futures rose 3-1/4 cents to $9.77-1/4 a bushel and China's Dalian soy futures most-active contract ticked higher.