Wheat futures at the Chicago Board of Trade closed lower on Monday on forecasts for rain in the US Plains and disappointing export news from Iraq, traders said.
Spillover weakness from soybeans and corn added pressure, along with weakness in the energy and gold markets.
However, funds were net buyers of about 2,000 wheat contracts, a factor that lifted wheat prices off their lows by the close.
Traders also noted intermarket spreading, with brokers buying wheat against corn.
CBOT March wheat ended down 3-1/2 cents at $3.70 per bushel. Most-active May closed down 5 cents at $3.80 after dipping to $3.74. The contract held above its 20-day moving average at $3.73-1/4.
R.J. O'Brien was a noted buyer of some 2,500 contracts on the day, traders said.
Volume was light, estimated by the exchange at 36,240 futures and 3,528 options.
Forecasters cited the potential for much-needed showers in dry areas of the US Plains over the next 10 days, although rain amounts were questionable. Drought has been stressing the Plains hard red winter wheat crop.
After the markets closed, the US Department of Agriculture said in a monthly state report that 27 percent of the Kansas wheat crop was rated in good to excellent condition, a drop from 52 percent the previous month.
News that the United States would miss out on most of a large wheat sale to Iraq also weighed on prices. Iraq on Sunday said it had signed contracts to buy 500,000 tonnes of wheat from Canada, 350,000 tonnes from Australia and only 150,000 tonnes from US firms.
Iraq trade ministry sources on Monday said Iraq would buy another 500,000 tonnes of wheat from Canada and Australia to complete a 1.5 million-tonne tender issued in January.
The US share of the business was "a bit disappointing," Prudential Financial analyst Shawn McCambridge said.
"That market is pretty well opened up to all the world exporters. Psychologically it's a bit on the bearish side."
Meanwhile, Australia's AWB Ltd, a key US competitor for global wheat business, said it sold almost 1.5 million tonnes of wheat in major new deals to India, Yemen, Kuwait and Iran.
The USDA reported weekly export inspections of US wheat at 15.3 million bushels, within a range of trade estimates for 13 million to 18 million.
Deliveries on the CBOT March wheat contract totalled 70 lots, and an ABN Amro customer was the key stopper of 51 lots. Registrations with the CBOT dipped to 766 lots from the previous 789.
Friday's CFTC Commitments of Traders report showed that large speculators expanded their net long position for the week ended February 28. For futures and options combined, large speculators were net long 14,256 contracts. For futures only, funds cut their net short position in CBOT wheat to 1,301 lots.