Grain and oilseed prices rose the most allowed by the Chicago Board of Trade after the U.S. government said domestic and world supplies of corn, soybeans and wheat will be smaller than forecast last month.

The U.S. Department of Agriculture cut its domestic corn- crop estimate for the second time in as many months, predicting a 3.4 percent drop from last year. While farmers will collect the most soybeans ever, the total will be 2.2 percent less than forecast in September, the USDA said. Global wheat inventories will be 1.8 percent less than projected last month.

Before today, corn prices surged 33 percent since the end of June as unfavorable weather dimmed prospects for crops in the U.S., the world's largest grower and exporter. Soybeans were up
18 percent over the same period, and wheat had gained 42 percent the past year after drought ruined fields in Russia and too much rain diminished supplies from Canada.

"Although the trade had increasingly braced for a downward revision in corn yields, the USDA provided a far larger-than- expected shock," Lewis Hagedorn, a commodity analyst for JPMorgan Chase & Co., said in a report. "Meaningfully higher prices are now required in order to ration demand," specifically for corn used to make ethanol, Hagedorn said.

Eoin Treacy's view Subscribers will recall John Macintosh's prescient report which appeared in Comment of the Day under the title of "It's a kind of Magic!" on Tuesday. Last Friday's rather violent pullbacks helped to at least partially unwind the overbought conditions relative to the 200-day MA and prices were already finding support earlier this week. Today's limit-up moves on wheat, corn, soybeans, oats, rough rice and cotton confirm support at this week's lows and these would need to be taken out to question potential for further upside.