U.S. soybeans rose nearly one per cent on Wednesday, posting the biggest three-day gain in seven months, on concerns about shrinking old-crop stocks as Argentine harvest prospects wane and brisk exports of U.S. soy draw down razor-thin supplies.

Soybeans withstood an across-the-board selloff in commodities triggered by rumours that a troubled hedge fund was selling assets.

"Soybeans rallied sharply after rains brought less moisture than needed to Argentina, and farmers in Argentina are holding their soybeans as a store of value in an inflationary environment," said Anne Frick, Jefferies Bache oilseeds analyst.

Technical buying also surfaced in the soy market after the bellwether March contract on Tuesday broke above chart resistance at its 50-, 100- and 200-day moving averages.

Soybeans have gained nearly five per cent in the past three trading sessions, the biggest three-day rally since a drought-fuelked jump of more than six per cent early last August.

Wheat rose nearly one per cent on spillover buying from the soybean rally and on brisk exports of U.S. wheat following the market’s drop to seven-month lows, which left U.S. wheat at bargain levels.

Corn gained nearly one per cent, the biggest one-day advance this month, on spillover support from the soybean rally and concerns about dry weather stress on Argentina’s corn crop.

However, gains in grains and soybeans were slowed by a turn to crop-friendly weather in the United States following the worst drought in 50 years, which sent prices to record highs.

Chicago Board of Trade (CBOT) March soybeans were up 12-1/2 cents at $14.82-3/4 per bushel, March corn was up 5-3/4 at $6.95-1/4, and March wheat was up 6-1/4 cents at $7.38-1/2 (all figures US$).

Traders and analysts said the soybean market was soaring as exports from a drought-reduced U.S. grain bin turned brisk and as soybean stocks from South America remained difficult to buy.

Snafus and vessel backups at Brazilian ports and tight farmer holding of soybeans have boosted the CBOT March/November to $1.93, premium March. The larger spread is a reflection of tightening old-crop supplies and is the widest since mid-December.

Demand by China, the world’s largest soybean buyer, remains brisk, with the U.S. Department of Agriculture (USDA) on Tuesday announcing a sale of 120,000 tonnes of U.S. soy to China.

"There has been concern that slowdowns in the shipment of new-crop soybeans from South America may drive importers back to the U.S., which does not really have the supplies to support additional or unexpected demand," Frick said.

USDA in its February crop and supply/demand reports pegged the ending stocks of U.S. soybeans for the current 2012-13 marketing year at 125 million bushels, the lowest in nine years. The stocks-to-use ratio at 4.39 per cent would be the tightest in nearly 50 years.

"The U.S. usage pace is extremely high relative to supplies, and this will cause the need for extreme usage rationing in the second half of the crop year," Frick said.

Weather counters wheat exports

A return to brisk export sales of U.S. wheat after prices fell to seven-month lows helped underpin that market, as did spillover buying from soaring soybeans.

Egypt, the world’s biggest importer of wheat, on Wednesday bought 60,000 tonnes of U.S. soft red winter wheat, and traders said China bought 350,000 tonnes of U.S. wheat over the last 10 days.

Also, European traders said China had bought 400,000 tonnes of Australian wheat and about 100,000 tonnes of Canadian wheat in recent days.

Improving U.S. wheat belt weather tended to mute the bullish impact of the export deals.

Crop-friendly rain and snow are blanketing much of the drought-stricken U.S. Plains hard red winter wheat region and the dry western Midwest, an agricultural meteorologist said.

"Widespread coverage of the Plains and western Midwest will occur in the next two days, including 10 to 18 inches of snow in much of southern Nebraska, Kansas and northern Missouri," said Commodity Weather Group meteorologist Joel Widenor.

Gains in corn futures also were slowed by the turn to wetter weather in the U.S. Plains and Midwest.

The rain and snow will help boost wheat, corn and soybean production prospects in the United States this year, a bearish factor for CBOT grain and soy futures.

— Sam Nelson writes on the CBOT grain and soy futures markets for Reuters from Chicago.