LONDON (Reuters) - Corn prices rose to record highs on Monday and looked set to climb further as torrential rains threatened to reduce further U.S. crop prospects in a market already facing tight supplies and surging demand.

Corn stalks in the harvested fields of Prairie City, Iowa, in a file photo. Corn prices rose to record highs on Monday and looked set to climb further as torrential rains threatened to reduce further U.S. crop prospects in a market already facing tight supplies and surging demand. REUTERS/Shannon Stapleton

The lead July 2008 corn futures contract rose as high as $6.73 per bushel, up more than 3 percent and a record for a spot contract. It closed on Friday at $6.50-3/4 while the July 2009 contract scaled an all-time peak of $7.20.

“We’ve got some rain in the United States that could reduce some of the plantings and yields for corn. Combine that with the drive into ethanol and you can see why corn is going to spike up,” said analyst David Hart of Fat Prophets.

Strong demand for corn from U.S. biofuel producers has contributed to supply tightness in the corn market. The U.S. Department of Agriculture has forecast about a third of this year’s crop will be consumed by the biofuel sector.

“I am still very bullish. I think $7, $8, $9 corn is well within reach,” said Commerzbank analyst Edward Hands.

“The mandated biofuel side continues to weigh heavily on the corn balance sheet and the plantings this year seem to be very late,” he added.

Nobuyuki Chino, president of Unipac Grain Ltd in Tokyo, said any drop in area and yields could lead to a further decline in already low stock levels.

“It is a very fragile market, and we are now standing at a very crucial point in time,” he said.

BULLISH CONSENSUS

Others agreed that corn was headed higher.

“I think the widely held view is that (corn) will be rising another notch towards the summer,” said Kenji Kobayashi, a grains analyst at Tokyo’s Kanetsu Asset Management.

Soybean, wheat and rice prices also rose sharply on Monday.

July 2008 soybean futures on the Chicago Board of Trade rose to a peak of $14.89-1/2 a bushel, up 32 cents and the highest level for the contract since early March.

Prices for soybeans have been boosted by a prolonged conflict in key exporter Argentina between farm groups and the government which has paralyzed local markets.

“The Argentinian situation seems to be weighing on the beans at the moment,” Hands of Commerzbank said.

Soybeans were also buoyed by sharp gains in corn prices.

Wheat price also rose.

July 2008 wheat futures on the CBOT climbed as high as $8.38 per bushel, up more than 3 percent from Friday’s close.

In Europe, the Paris November milling wheat futures contract

rose 9.00 euros to a peak of 199.00 euros a tonne, threatening to break above the key 200 euro level for the first time in a month.

“We are following the U.S. market but we are slowed down by still bright prospects for the harvest,” one European grain trader said.

U.S. rough rice, which initially bucked the trend and dipped, recouped earlier losses.

July rice rose more than 2 percent to $20.40 per hundredweight, after it ended on Friday at $19.96.

(Additional reporting by Miho Yoshikawa in Tokyo)