U.S. corn futures set a fresh 29-month high Wednesday on dry Argentina weather and worries about supplies in 2011.

Corn for March delivery at the Chicago Board of Trade ended 6 3/4 cents, or 1.1%, higher at $6.09 per bushel. It is the highest settlement for front-month corn since July 18, 2008, shortly after historic Midwest flooding and a general commodity surge pushed prices close to $8.

Traders are rallying the market on tight global supplies expected well into 2011, and remain concerned about heat and dryness in Argentina, the world's second-largest corn producer. The crop there is in the midst of pollination, a key period for determining yield.

A disappointing 2010 U.S. crop, a severe drought in Russia that hurt that country's crops, and strong demand are causing supplies to dwindle.

The 2011 U.S. crop is raising concerns as well as traders and analyst try to gauge whether enough corn will be planted next year to keep pace with global demand. While analysts widely expect farmers to increase their plantings from 2010 because of strong prices, other crops, including soybeans, cotton and wheat, also are enjoying robust prices, giving farmers other attractive options.

"You've got all these crops competing pretty aggressively for acres," said Marty Foreman, an analyst with Doane Advisory Services in St. Louis.

While acreage projections always play a factor in the market ahead of spring planting, the debate this year has arrived about two months sooner than normal because of the anxiety about next year, said Joe Victor, business development specialist with the Minneapolis Grain Exchange.

"You don't have that cushion in corn [supplies] that you normally have," Victor said.

Despite the new bull-market high for front-month corn, many traders say the March contract high of $6.17 1/2 remains a more important upside target.

Farmer selling at the current high prices and a potential pullback in demand could limit the market's upside, analysts said.

CBOT oats futures were mostly lower Wednesday. Oats for March delivery ended down 2 1/2 cents, or 0.6%, to $3.91 3/4 per bushel.

Ethanol futures continued to climb amid strength in corn and crude oil. January ethanol settled up $0.023, or 1.0%, to $2.279 per gallon. The contract is up 9.3% in the last two weeks.

-By Ian Berry, Dow Jones Newswires; 312-341-5778; ian.berry@dowjones.com

(END) Dow Jones Newswires

December 22, 2010 15:33 ET (20:33 GMT)