Corn futures rebounded more than 3%, dragging fellow grain wheat higher, on mounting talk that Chinese buyers had taken advantage of prices which closed Chicago's last session at a three-month low.

"I have heard rumours China has bought 500,000 tonnes of US corn, 750,000 tonnes, may be 1m tonnes," Jerry Gidel, feed grains analyst at broker Rice Dairy, told Agrimoney.com.

"This has not been confirmed. But the rumour has most definitely gained traction in the market."

Indeed, it helped erase disappointment at a US crop trade report on Thursday which showed corn export sales of just under 300,000 tonnes, 2011 and 2012 crop combined, for the week to last Thursday.

Most analysts had expected a figure at least twice as big.

Ukraine setback?

However, FCStone picked out some positives for corn in the weekly report, with the smallprint showing "a small cargo to China, in the loadings".

Chicago investors are particularly sensitive to rumour of Chinese buying of corn given the country's potential, as the second-ranked consumer, to emerge as a strategic importer, as it already has in the like of soybeans.

Furthermore, corn gained extra support from a report that Japan, the world's top buyer, had suspended purchases of corn from Ukraine on quality issues, with the grain, softer than the US equivalent, containing a higher level of broken kernels.

Ukraine has been seen as an increasingly serious competitor to the US, and South America, as a corn exporter.

In South America, Argentina cut by 900,000 tonnes to 20.3m tonnes its forecast for the domestic corn harvest. 

'We expect significant liquidation'

The rally was also seen as being fuelled by the unwinding of long soybean/ short corn spreads, which have been a popular trade given the continuing downgrades to South American harvests of the oilseed, and persistent Chinese buying.

China bought a further 110,000 tonnes on Thursday, the US Department of Agriculture announced through its daily export alerts system.

"The last two days there has been a significant round of liquidation in the corn bull spreads – that is, selling old crop and buying new crop," Darell Holaday at broker Country Futures said.

 "Today we are beginning to see the first round of soybean/corn spread liquidation. There are a lot of long soybean/short corn positions and we expect significant liquidation of those positions over the next weeks.

"This will be supportive to corn relative to the soybean market."

Corn futures for May delivery closed at $6.21 a bushel in closing deals in Chicago trading, a gain of 3.2%.

May wheat ended 2.3% higher at $6.24 ¼ a bushel.

Import arbitrage