UPDATE 1-GRAINS-U.S. grains strengthen on drought; corn jumps 3 pct

* New-crop corn firms 3 pct on likely weather damage
* Wheat, soybeans strengthen
* USDA to issue July crop report on Wednesday

(Updates prices, adds details on Chinese soybeans)
By Colin Packham
SYDNEY, July 9 (Reuters) - U.S. new-crop corn jumped 3
percent on Monday to a contract high, leading strong gains for
the grain complex as unfavorable weather across the United
State's Midwest persists, threatening crop yields further.
Soybeans also rose 2 percent as the front-month contract
edged towards a record high.
Chicago Board Of Trade December corn rose 3 percent to
$7.14 a bushel, having hit a high of $7.16-1/4 a bushel and
recouping Friday's losses, when it fell 2.2 percent. On a
continuation basis, the third month contract is trading at
its highest since September.
Front-month corn touched a high of $7.16-3/4 a bushel
on Monday, not far from a record high of $7.99-3/4 set in June
2011 and spot-month soybeans rose to $16.51 a bushel, just
below the all-time high of $16.63 notched in July of 2008.
"We are seeing what is shaping up to be the worst drought in
nearly two decades hitting the corn belt, which is spurring
speculation as to what is going to happen to yields and the
overall production outlook," Michael Creed, agribusiness
economist at National Australia Bank said.
"You also need to bear in mind that coming into this season,
ending stocks were quite low by historical standards too."
Wheat also rose. September wheat firmed 2.3 percent to
$8.24-1/2 a bushel after slipping 3.2 percent on Friday.
"Wheat is being driven by corn. When the price of corn goes
up, animal feed demand will switch to wheat, while the price
also an effect on planting numbers next year," Creed said.
The most-active November soybeans rose 2.4 percent to
$15.42-1/2 a bushel after falling 1.4 percent in the previous
session.
In China, the world's top soy importer, soy prices on the
Dalian exchange jumped more than 3 percent on fears the U.S.
drought will increase costs.
"The prices are driven by the Chicago market rally.
Investors are speculating on U.S. drought and lots of funds are
flowing into the market, particularly (Dalian) soymeal," said
Wang Ping, an analyst with Dong Wu Futures based in Shanghai.
"The open interests have increased significant over past
days and also today, which have hit a record high level."

RAINS DELAYED
A three-week period of sustained hot, dry weather across
much of the Unite States has propelled the grain complex higher
with corn leading the way. December corn has jumped 37 percent
during the last three weeks.
While Nebraska and Kansas saw some rain over the weekend,
the eastern corn belt was unlikely to have any showers until the
middle of next week, according to extended forecasts.
The latest U.S. Drought Monitor report, released on
Thursday, showed drought encompassing more of the contiguous
United States than at any other time since the report began in
January 2000.
The blistering heat has begun to ease, however, with a
slow-moving front of cool air from Canada starting to push down
temperatures on Sunday from Minneapolis to Detroit to
Pittsburgh.
But with crops in at a key stage, analysts expect the spell
of unfavorable weather to significantly impact yields.
All eyes will be on the U.S. Department of Agriculture July
crop report, set to be issued on Wednesday, with analysts
expecting the agency to revise down its yield estimate.
Private analytical firm Informa Economics lowered its
estimate for the U.S. 2012 corn yield to 153.5 bushels per acre
from its previous figure of 154.9 bushels in late June, the firm
said on Friday in a note to clients.
It calculated U.S. corn production at 13.641 billion
bushels, compared with its June 29 estimate of 13.76 billion.
The firm's corn estimates were below the U.S. Department of
Agriculture's current forecasts for a crop of 14.790 billion
bushels based on a record-high yield of 166 bushels per acre.
USDA revised its 2012 U.S. acreage estimates last week and
the government was scheduled to issue updated crop production
and yield estimates on July 11.
Informa lowered its estimate of the U.S. 2012 soybean yield
to 42.0 bushels per acre, from its previous estimate of 42.7. It
estimated soybean production at 3.161 billion bushels, compared
with its June 29 estimate of 3.21 billion.
USDA currently projects the soybean crop at 3.205 billion
bushels based on an average yield of 43.9 bushels per acre.

Grains prices at 0635 GMT
Contract Last Change Pct chg Two-day chg MA 30 RSI
CBOT wheat 824.50 18.25 +2.26% +25.49% 620.14 74
CBOT corn 714.00 21.00 +3.03% +8.43% 612.39 80
CBOT soy 1542.50 36.75 +2.44% +25.66% 1165.73 88
CBOT rice $15.15 $0.10 +0.63% +3.45% $14.45 63
WTI crude $84.69 $0.24 +0.28% -17.74% $98.34 53
Currencies
Euro/dlr $1.229 -$0.065 -5.05% -5.83%
USD/AUD 1.019 -0.018 -1.73% -1.76%
Most active contracts
Wheat, corn and soy US cents/bushel. Rice: USD per hundredweight
RSI 14, exponential

(Additional reporting by Naveen Thukral, editing by Miral
Fahmy)