Soybean futures rose to a seven-month intraday high Tuesday after the U.S. government cut its forecast for domestic supplies.

A disappointing crop in South America will continue to steer buyers to the U.S., the Department of Agriculture said in its monthly report. The USDA lowered its estimate for Brazil's crop and increased projected U.S. exports.

Soybean futures have climbed 30% in the past four months while economic concerns have weighed on a broad range of other markets. Soybeans reached a seven-month intraday high of $14.52 1/4 Tuesday before retreating, settling down 5 cents to $14.26 a bushel for the May contract on the Chicago Board of Trade.

The USDA report, the World Agricultural Supply and Demand Estimates, reaffirmed concerns about tightening supplies. Soybeans' rise since mid-December has been driven by the South America drought and strong export demand from China.

The government slashed its soybean production estimate for Brazil to 66 million metric tons for the current crop marketing year, which ends Aug. 31. The estimate is down 2.5 million from the prior month and one million tons below analysts' expectations.

Meanwhile, the USDA increased projected soybean exports to 1.29 billion, up 15 million from its March forecast, and lowered its domestic stockpile projection for the end of the marketing year by 9.1% to 250 million bushels.

The report sets up a "potentially explosive" situation for soybean prices in the year ahead, particularly if South America production estimates are cut further, said Rich Feltes, vice president of research for R.J. O'Brien.

The disappointing South American crop will put more pressure on the U.S. to replenish world supplies, analysts said. Traders have been worried about whether U.S. farmers would plant enough acreage this year. The USDA last month said farmers would plant 74 million acres, one million below a year ago. That could make the market especially sensitive to any threats to this year's crop, analysts said.

"If you tack a weather situation on to this, the market could challenge all-time highs" in prices, said Doug Bergman, a broker with RCM Asset Management. Prices peaked at $16.63 in 2008.

Corn futures declined as the USDA left its domestic corn stockpile projection for the end of the marketing year unchanged at 801 million bushels, surprising traders who had widely expected the stockpile estimate to decline. CBOT futures for May delivery closed down 14 1/4 cents to $6.34 3/4 a bushel.

"We're tight, but we're not going to run out," said Sal Gilbertie, president of Teucrium Trading, which operates several commodity exchange-traded funds.

A drop in stockpiles was expected, in part because of strong U.S. corn-export sales recently including confirmation of deals with China.

Instead, the USDA said a quick start to the corn-planting season--and increased acreage devoted to the grain across the U.S. South--would lead to an early harvest that replenishes corn supplies before the marketing year ends. It added that livestock producers would feed more wheat to their animals instead of corn, helping keep corn supplies stable.