GRAINS-Soybeans, corn climb to record highs on U.S. drought

* Spot soybeans hit record high on concerns of drought damage
* Front-month corn hits record top
* Wheat hits 4-year high

(Adds analyst, updates prices)
By Colin Packham and Ivana Sekularac
SYDNEY/AMSTERDAM, July 19 (Reuters) - U.S. soybeans rose to a record high on Thursday, while
front-month corn scaled an all-time high as weather maps showed no sign of an end to a drought
that has damaged U.S. crops and provoked concern about food supplies.
Wheat tracked corn higher, with spot wheat firming to a 4-year high.
Chicago Board Of Trade August soybeans rose 1.71 percent to $17.12-1/4 a bushel, a
record high for the contract, while November soybeans, the most actively traded contract,
rose 1.42 percent to $16.43 a bushel.
"For the third consecutive year, weather has dashed hopes for a strong U.S. corn and soy
crop. With drought continuing to broaden across the U.S. cornbelt, the market is growing to
appreciate that yields should register well-below trend," Morgan Stanley said in a report on
Thursday
"Reduced supply will necessitate higher prices, in our view, to bring about needed demand
rationing, to preserve already record or near-record tight inventories."
Spot corn rose 1.92 percent to $8.10-1/4 a bushel, past the previous high of $7.99-3/4
a bushel set in July, 2011.
December corn rose 1.66 percent to $7.97-1/4 a bushel after finishing up 1.7 percent
on Wednesday.
September wheat rose 1.69 percent to $9.18-1/2 a bushel, its highest level since 2008.

DEMAND RATIONING
U.S. crops have withered as a result of the worst drought since 1956, and updated weather
maps showed more crop-damaging weather in the U.S. Midwest where the drought is centered, with
the light rain forecast for the region's west and southwest unlikely to provide much relief for
crops.
Analysts believe the drought is likely to damage crops even further than the U.S. Department
of Agriculture forecast: a Reuters poll suggested the drought was continuing to shrink the U.S.
corn and soy crops.
"We are going to need unprecedented demand rationing to make the U.S. balance sheet work,"
said Nicholas Higgins, Rabobank analyst.
"We need to see continuous signs of plunge in ethanol production and livestock liquidation."

The anticipated decline in grain and oilseed supplies is having a significant impact on
producers.
Soymeal futures rose 0.7 percent on Thursday to an all-time high of $517.8 per tonne,
as the shrinking corn crop reduced feed supplies in the United States.
U.S. ethanol output also fell 2.3 percent last week to its lowest level since the government
began tracking the data in June 2010 as near-record-high corn prices and slumping fuel demand
dragged margins at many plants into the red.
Worldwide wheat supplies may also suffer as the Black Sea region endures its own drought.
Lack of rain in South America has also reduced crop output in that region.
Kazakhstan said it expected a below-average crop this year due to drought in its northern
grain belt. Its grain crop may decline 48 percent to 14 million tonnes this year from last
year's post-Soviet record.
Russia may also export just 10 million tonnes of wheat this year, down 64 percent from last
year's record of 28 million tonnes, due to low stocks and a drought in southern regions, analyst
SovEcon said.

* Prices as of 0951 GMT

Product Last Change Pct Move End 2011 Ytd Pct

Paris wheat 0.00 -261.25 -100.00 195.25 -100.00
London wheat 194.00 3.60 +1.89 153.65 26.26
Paris maize 258.75 3.25 +1.27 197.25 31.18
Paris rape 521.50 4.50 +0.87 421.50 23.72
CBOT wheat 918.00 14.75 +1.63 671.25 36.76
CBOT corn 809.50 14.50 +1.82 654.75 23.63
CBOT soybeans 1712.50 29.00 +1.72 1207.75 41.79
Crude oil 90.64 0.77 +0.86 98.83 -8.29
Euro/dlr 1.23 -0.11 -8.05 1.30 -5.19
* All grain and oilseed prices for second position. Paris futures prices in Euros per tonne,
London wheat in pounds per tonne and CBOT in cents per bushel.

(Editing by Keiron Henderson)