U.S. corn futures rose Monday by as much as the daily 40-cent trading limit, then settled within striking range of the record high of nearly $8 per bushel, as an unrelenting drought took further toll on the crop.
The U.S. Agriculture Department, in a weekly report after the close of trading, cut its corn crop condition ratings by the most in about a decade, pegging ratings for both the corn and soybean crops as the worst since the historic drought year of 1988.
And the crops could get worse. Weather models updated at midday scaled back forecasts for rains in the eastern Midwest while a high pressure ridge likely to block moisture in the western part of the region where most of the U.S. corn and soybean are grown.
"The damage had already been done in 1988, whereas here in 2012 the situation is still evolving," said Bill Nelson, analyst with Doane Advisory Services.
The drought, the worst in 24 years, was taking a heavy toll in the Midwest even in states like Nebraska, where a large portion of the state's farmland are irrigated.
The state ordered more than 1,100 of its farmers to halt irrigating their crops because the rivers from which they draw water are being depleted by the drought.
Corn for September delivery ended 36-1/4 cents higher at $7.76-3/4 per bushel after rising the daily limit of 40 cents. The most-active December, the first contract to reflect the fall harvest, gained 32-1/4 cents to $7.72-1/2 (all figures US$).
"The forecasts all shifted this morning. Basically, we have the same (forecasts) for the next 10 days at least -- no moisture," said Citigroup analyst Sterling Smith. "We are beginning to see appreciable damage in the western Corn Belt and that's just adding to the nervousness."
Midday weather models reduced chances for rain in the eastern Midwest while scorching weather is expected to continue throughout the region.
New-crop November soybeans jumped 38 cents to $15.90-1/2 per bushel after earlier hitting a contract high of $15.97.
USDA after the close rated the corn crop at 31 percentage good to excellent and soybeans 34 percent good to excellent, with ratings cuts of each crop steeper than analysts expected.
"This does nothing"
Extreme dryness and heat this summer first hurt crops in the eastern and southern Midwest, but now that weather is expanding into western and northwestern states such as Iowa, Nebraska, Minnesota and the Dakotas, all major producers of corn and soybeans.
"We need soaking rains now. We need two to three inches, and that's not in the forecast. This does nothing for the crops," said AgResource Co analyst Dan Basse.
Wheat futures jumped in sympathy with surging corn and on news that Russia may revise its grain export forecasts as winterkill and spring drought reduced the size of the crop their, which was expected to be the fourth largest exporter this year.
CBOT September wheat ended 36-3/4 cents higher at $8.84-1/2 a bushel, highest since February 2011 on a continuous chart.
"The Russian wheat number surprised some folks and that was seen as supportive," Basse said. "We must be looking at whether Russia will slow or stop exports."
-- Michael Hirtzer reports for Reuters from Chicago. Additional reporting for Reuters in Chicago by Sam Nelson.