Soybeans led the gains. The focus of worries about drought damage is shifting toward soybeans as the crop approaches its critical growing period in late July and August, when the plants will set their pods and fill them out with beans. Weather in the next several weeks will have a major effect on soybean yields at harvest.

While most of the corn crop has completed its critical pollination phase, that crop still also stands to lose more yield potential if the drought continues to worsen, analysts say.

Forecasts currently remain unfavorable. Rains in coming days are expected to be too spotty to substantially improve soil moisture in key corn- and soybean-growing areas, and temperatures are expected to cool as the weekend approaches but then to heat up again.

"I think the recent acceleration in the markets is due to really big trepidation that the western Corn Belt...is going to succumb to the heat and dryness and soon the crops there will look just like the nonexistent crops in Illinois and Indiana," said Joel Karlin, an analyst with Western Milling.

Chicago Board of Trade August soybeans settled up 50 1/4 cents, or 3.0%, at $17.33 3/4 a bushel, after trading as high as $17.49 a bushel in the morning, setting fresh all-time intraday and closing highs for the front month.

September corn settled up 12 3/4 cents, or 1.6%, at $8.07 3/4 a bushel, after trading as high as $8.16 3/4 a bushel, also setting all-time highs. December corn fell 5 3/4 cents, or 0.7%, to $7.78 1/2 a bushel.

The rally in corn and soybean prices isn't likely to end until more consistent rains arrive and temperatures fall, Mr. Karlin said.

One effect of the high corn prices has been lower demand for the grain from exporters and ethanol producers. But for soybeans, analysts say demand has still been strong, suggesting prices need to rise further to reduce demand amid tight supplies.

Declining ethanol production could also reduce production of the byproduct distillers dried grains, which would boost demand for soybean meal instead, since both are used in animal feed, Mr. Karlin said.

Nearby wheat futures followed corn higher, and received an extra boost from ongoing uncertainty about how much wheat will be harvested in the Black Sea region. With dry weather having reduced forecasts for production, traders worry that Russia or Ukraine could bar exports to keep supplies at home.

CBOT September wheat rose 31 3/4 cents, or 3.5%, to $9.35 a bushel. Kansas City Board of Trade September wheat rose 32 cents, or 3.5%, to $9.38 a bushel. MGEX September wheat rose 24 cents, or 2.4%, to $10.22 a bushel.

Write to Owen Fletcher at owen.fletcher@dowjones.com

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