The price of U.S. corn soared to a record high on Thursday after a government report said poor spring planting conditions have reduced this year's crop potential and will further squeeze already tight market supplies.
But corn futures at the Chicago Board of Trade did not rise to their daily trading limits, and dealings settled back into a range as traders pondered the market's direction in the weeks ahead.
Corn peaked at a record $7.93 per bushel in spot July, notching impressive gains for the third straight day before easing to trade at $7.87 per bushel, up 23 cents, as of 12:58 pm. CDT (1758 GMT).
Traders and analysts said bullish factors remained intact for corn but the market was taking a breather after already soaring nearly 17 percent over the past month and adding 6 percent in value this week.
"Everybody was already long, we added a lot of open interest over the past few weeks," said Matt Pierce, analyst for GrainAnalyst.com.
Investors had been buying corn ahead of Thursday's monthly supply-demand report from the U.S. Department of Agriculture.
USDA cut its estimate of U.S. corn acreage by 1.5 million acres to 90.7 million and reduced its corn crop forecast by 305 million bushels to 13.2 billion.
It said the corn supply at the end of the 2011/12 crop year — just before next year's harvest — will fall to 695 million bushels, below its May forecast of 900 million and analysts' predictions which averaged 771 million.
Excessive rainfall and flooding in the heart of the Corn Belt has resulted in the worst planting season in years, forcing some farmers to abandon corn acres and threatening to reduce per-acre yields at a time when every bushel is needed to meet soaring demand from feeders and fuel makers.
"Everyone was looking for a friendly report for corn, just not this friendly. It's going to be a long summer, no vacations this summer," said Paul Haugens, vice-president Newedge USA.
Wheat and soybean futures were weighed down by USDA's production and supply forecasts which exceeded trade expectations for both commodities.
At 12:58 p.m. CDT (1758 GMT), CBOT July wheat was up 1 cent at $7.49 and July soybeans were down 7 at $13.94-1/2.
Analysts said the corn market could see further gains later in the summer as investors shift their buying to the new-crop December corn futures contract that was trading up 18 cents at $7.11-3/4 per bushel.
"If we get any more reduction in yields or weather problems it won't take long for December corn to get to $8," said Joe Bedore, CBOT floor manager for trade house Intl-FC Stone.
ETHANOL NEAR 3-YEAR PEAK
Ethanol futures traded near three-year highs, gaining more than 2 percent to $2.74-1/2 per gallon.
Ethanol was lifted by the strong rally in corn and by gains in crude oil to back over $100 per gallon.
Corn is the chief feedstock for U.S. ethanol production, with roughly 40 percent of the U.S. corn crop distilled into the biofuel.
Spot corn futures were trading 38 to 39 cents above the price of wheat on Thursday, the widest premium since 1996.
Corn normally trades at a discount to wheat, but, driven by historically tight U.S. corn stocks, spot corn futures dipped below wheat futures in April for the first time in 15 years.
U.S. cattle and hog futures also sped higher on Thursday, with deferred months up the most, as higher corn prices may force producers to shrink herds, analysts said.
"There is less corn and therefore higher corn prices. And less feed means there will be less livestock, which translates into higher cash hog and cattle prices," said Ron Plain, University of Missouri agricultural economist.
"If it gets too expensive to feed them, you sell them quickly, which crimps the supply later," Peter Adams, principal at PNM Trading, said of the gains in cattle prices.
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