Argentine soy and corn prices gained strongly this week as a lingering drought continued to stoke worries of major damage to the developing crops.

Those fears helped boost global prices this week, as traders fretted over the prospects for less output coming from South America this season.

"Local prices kept climbing without a pause, boosted by enthusiastic buying," the Rosario Grain Exchange said.

Spot soybeans rose to 1,335 Argentine pesos ($311) per metric ton at the Rosario exchange Thursday, up from ARS1,270 last week.

Spot soy has risen ARS110 per ton over the past eight sessions, according to the Rosario exchange.

May soy sold for $300 per ton, up from $297 a week ago.

Earlier Thursday, the Buenos Aires Cereals Exchange made its first forecast for 2011-12 soy production, pegging the crop at a disappointing 46.2 million tons. That's well under the 50.5 million tons the U.S. Department of Agriculture has predicted coming from Argentina this season.

Hot, dry weather through December and early January backed the soy and corn crops and cut into potential yields.

Argentina is the world's No. 3 soybean exporter behind Brazil and the U.S., and the leader in global exports of soymeal and soyoil.

Meanwhile, March corn sold for $175 per ton, compared with $168 for February corn last Thursday.

The Buenos Aires exchange also made its first estimate for corn, pegging the crop at 22 million metric tons. That's down steeply from early expectations from the government of up to 30 million tons.

Argentina is the world's second leading corn exporter and the drought fears helped buoy global corn prices this week.

Wheat sold for $150 a ton, unchanged from a week ago. Argentina is a significant global wheat exporter, with most shipments going to neighboring Brazil.

-By Shane Romig, Dow Jones Newswires; 54-11-4103-6738; shane.romig@dowjones.com

(END) Dow Jones Newswires

January 26, 2012 16:23 ET (21:23 GMT)