Wheat futures led the rise in prices once again, as traders reduced risk by covering short positions amid hopes for increased export demand.

Traders are hopeful Russia will restrict its wheat exports, which may open up opportunities for U.S. export demand.

The wheat market is desperate for an increase in demand, particularly with world wheat supplies estimated at near record levels, said Shawn McCambridge, senior grains analyst with Jefferies Bache in Chicago.

The optimism for export demand provides psychological support from a market burdened with large inventories and limited export demand, said McCambridge. The export hopes and rallying corn futures were enough to shake some loose some of the record shorts in the market, he added.

A short position is a bet that prices will move lower. Wheat is tied to corn, as both compete as feed for the livestock industry.

Nevertheless, despite the recent push in prices, in reality the wheat market remains straddled with ample world supplies a feature that will limit longer-term price strength for the market, McCambridge added.

CBOT March wheat ended up 7 3/4 cents at $6.41 1/4 a bushel, March KCBT wheat ended up 11 cents at $6.97, and March MGEX wheat finished up 9 cents at $8.12 3/4.

Corn futures ended higher, as strong cash markets and continued worries about South America's crop kept buyers enthused. With farmers in a good financial position, they don't have to sell supplies to generate cash flow, and that is tightening available supplies.

A tighter cash market encourages traders to boost futures prices in hopes of prying loose supplies from farmers. Currently, exporters and processors are waged in a bidding war for supplies, forcing grain prices higher.

Meanwhile, declines in the crop estimate for Argentina and Brazil provide support for prices as well, with analysts expecting world buyers to shift interest to U.S. supplies on threats to Latin American crops, McCambridge said.

CBOT March corn ended up 4 1/4 cents to $6.34 1/2 a bushel.

U.S. soybeans stumbled, shunning the price influence of higher grain futures. Improved conditions for South American crops with yield-enhancing rains moving through Argentina and southern Brazil expected to boost production potential, weighed on prices.

CBOT March soybeans ended down 6 1/2 cents at $12.13 1/2 per bushel.

-By Andrew Johnson Jr, Dow Jones Newswires; 312-347-4604 begin_of_the_skype_highlighting 312-347-4604 end_of_the_skype_highlighting; Andrew.johnsonjr@dowjones.com