CHICAGO (Dow Jones)--U.S. corn futures ended higher Tuesday on an optimistic demand outlook, disappointing crop progress and underlying technical support.

July corn ended 3 3/4 cents, or 1.1%, higher at $3.59 3/4 a bushel and September corn ended up 4 1/4 cents at $3.68 1/4.

The market was due for a correction after hitting new three-week lows, traders said. But the upside is expected to be limited because the crop in general is seen as off to a good start. Funds bought an estimated 6,000 contracts Tuesday.

The market maintained gains throughout the session even as wheat and soybeans retreated, as analysts noted spread-trading between the markets. The corn market has underlying support around $3.55 a bushel, said Shawn McCambridge, senior grains analyst for Prudential Bache. He said it will be tough to push the market below that level this early in the growing season.

The recent break in prices has reignited talk of more Chinese buying, analysts added. While more buying from China wouldn't likely be enough to significantly alter the U.S. balance sheet for corn, it nonetheless gives the market a psychological boost, McCambridge said.

Lower-than-expected good-to-excellent ratings in Monday's crop progress report added to the supportive tone, analysts said. Analysts said that historically the ratings weren't bad, however, and that the crop in general is off to a strong start.

Weather forecasts are generally seen as favorable for the crop, with warmer and drier weather expected over the next several days, although rains in the Northwest corn belt could further stall planting there, analysts said.

CBOT oats ended higher Tuesday. July oats ended up 2 1/4 cents, or 1.2%, at $1.93 a bushel and September oats closed up 2 cents at $2.00 3/4.

Ethanol futures ended slightly higher. June ethanol settled up $0.003 at $1.606 a gallon and July ethanol closed up $0.009 at $1.619.


-By Ian Berry, Dow Jones Newswires; 312-341-5778; ian.berry@dowjones.com