(Updates U.S. market activity to close)
CHICAGO, Dec 26 (Reuters) - U.S. soybean futures rose about 1 percent on Tuesday, notching their second straight session of gains, as investors bought back short positions amid extended forecasts for warm and dry weather in Argentina, traders said.
Corn futures were narrowly higher and wheat slightly lower at the Chicago Board of Trade as volumes remained relatively light following Monday's Christmas holiday.
CBOT January soybeans finished 9-3/4 cents higher at $9.59-1/4 per bushel, rebounding from Friday's three-month low.
"Funds are sitting on a sizable short and I don't think they feel good about it," said Dan Basse, president of AgResource Co.
Speculative investors, including hedge funds, expanded net short positions in soybeans and corn and trimmed their net shorts in wheat in the latest reporting week, Commodity Futures Trading Commission data showed on Friday.
Abundant global supplies still anchored prices for soy and grains, but a dry weather pattern was lingering in Argentina, potentially reducing yield potential in the No. 3 global soy producer after the United States and Brazil.
Rainfall over the weekend in much of Argentina's main soy and corn areas will improve soil moisture, analysts said. But fields in some parts of the country could remain dry for the rest of the week.
In the United States, temperatures were expected to be below freezing for the next week in much of the Plains and Midwestern winter wheat-growing areas, potentially putting dormant plants at risk of damage, meteorologists and traders said.
But the overall lack of bullish news for wheat and corn limited potential gains.
CBOT March corn settled up 3/4 cent at $3.52-3/4 per bushel, a roughly two-week high. CBOT March wheat eased 2-1/2 cents to $4.22-1/4.
The U.S. Department of Agriculture said 1.3 million tonnes of U.S. soybeans, 609,281 tonnes of corn and 493,550 tonnes of wheat were inspected for export last week, all relatively near analysts' expectations. (Reporting by Michael Hirtzer, editing by G Crosse and Rosalba O'Brien)