U.S. soybean futures rose to a fresh 3 1/2 year high Wednesday amid ongoing concerns about a smaller South American crop and expectations for increased export demand.

Front month soybean futures climbed to an intraday high of $14.93 a bushel, their highest level for a spot month future since July 2008.

Soy futures have rallied as analysts have steadily reduced their expectations for soy output in Brazil and Argentina due to drought.

Expectations for greater Chinese demand for U.S. soybeans are also driving the futures rally. Talk that China may have bought from 500,000 to one million metric tons of U.S. soybeans this week helped fuel bullish enthusiasm.

However, soy futures failed to sustain the lofty levels established early on, as traders began to take profits on thoughts the rally had left prices overbought.

"The front end of the market was a little overdone, with traders saying the rise to 3 1/2 year highs was accomplishing the feat of rationing demand," said Mike Zuzolo, president of Global Commodity Analytics and Consulting.

Traders sold nearby contracts and bought deferred contracts, as the fresh bias on South American production illustrated the need for more price premium in contracts that represent U.S. crops to be harvested in the fall, Zuzolo said.

The smaller South American crop sizes will put increased pressure on U.S. production to make up for the shortfall in Brazil and Argentina. Uncertainty about U.S. production heading into the planting season requires more price premium to secure additional soybean acres in the U.S. and in South America in the fall, Zuzolo added.

CBOT May soybeans settled 12 1/4 cents higher at $14.73 1/2 a bushel, and November soybeans ended up 18 1/2 cents to $13.70 1/2.

Separately, U.S. corn futures closed lower, succumbing to profit taking on recent gains. The declines were surprising to some traders after the U.S. Department of Agriculture announced new export sales of 682,500 tons, with 262,500 tons of the sales to China.

The announced sales were confirmation of rumored sales in the past week, leaving traders without fresh news to justify pushing prices higher, analysts said.

CBOT July corn ended down 7 cents at $6.01, and the December contract that represents crops to be harvested in the fall dropped 3 1/2 cents to $5.38.

CBOT July wheat ended down 6 cents at $6.26 1/2 per bushel, July KCBT wheat ended 1/2 cent lower at $6.42 and July MGEX wheat ended up 3/4 cent to $7.86.

-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