US corn surges 3.7pc as USDA slashes crop size

Soybeans also rose sharply and were poised for the biggest one-day bounce in four months after the US Department of Agriculture also cut its soy crop forecast more than expected.

USDA, in its first survey-based production estimate of the corn and soybean crops, pegged corn production at 12.914 billion bushels. That would be the second-largest crop ever, but it falls short of analysts' estimates of 13.082 billion bushels.

The corn stockpile, already forecast to be the lowest in 15 years, was expected to shrink further, USDA said.

"Investors are more confident that there is a floor in place in corn. More importantly, speculators view a more explosive price scenario as more possible than they had before," said Adam Tepper, analyst at Arlon Group, an agriculture-focused investment company.

Corn futures fell to a one-month low earlier this week amid plunging equities, but losses in grain futures have been limited in recent days due to tightening supplies in the United States.

"(Corn) yields continue to look worse and the USDA surprised everyone by forecasting below-trend yields in Iowa and Nebraska," Tepper added.

Benchmark September corn was up 25 cents at $7.03 per bushel after earlier hitting $7.08, the highest price in more than a week, as some traders locked in profits after the limit-up move, traders said.

"The reports were friendly and you have the outside markets that are supportive here as well," Citigroup analyst Mario Balletto said. "But we'll probably be trading today. You'll see some profit-taking. I don't think we'll hold onto the positions."

USDA also took down its production estimate for soybeans, placing the crop at 3.056 billion bushels, below the lowest trade guess. Several analysts said the USDA set the stage for further reduction since much of the crop has yet to enter its crucial pod-setting phase.

Spring wheat production excluding durum was pegged at 522 million bushels, down from the average guess of 541 million bushels. Durum production was pegged at 57.1 million bushels, below estimates of 61 million bushels.

CBOT November soybeans were up 34 cents at $13.35-1/2 per bushel, a gain of 2.6 percent, while September wheat climbed 12-1/4 cents to $6.97-1/4, a 1.8 percent

Rains this spring delayed plantings in the southeastern Corn Belt and the northern US Plains spring wheat belt, while record temperatures during July, including a historic drought in Texas and Oklahoma, stressed crops across the central United States. Prices at 11:19 a.m. CDT (1619 GMT)

Copyright Reuters, 2011