GRAINS-US corn surges daily trading limit on frost fears

* Forecasts for US Midwest frost next week buoy grains

* CBOT corn surges 9.4 pct to one-month high

* Soybeans rise nearly 7 percent

* Wheat follows rally as traders cover short positions

CHICAGO, Sept 15 - U.S. corn prices surged 9.4 percent on Tuesday, rising the maximum daily trading limit after forecasts called for a frost in the U.S. Midwest next week that could shorten the growing season, traders said.

"It's the main thing everyone is talking about. No matter how you cut it, it's rallying on weather," said Joe Bedore, floor manager for trade house FC Stone at the Chicago Board of Trade.

CBOT corn futures for December delivery rose as much as 30 cents to $3.47-3/4 per bushel, the highest level in more than a month. Corn for March and May delivery also went limit up.

CBOT November soybeans rose nearly 7 percent to as high as $9.77-3/4. Soymeal futures for delivery through March rose the rose the daily trading limit of $20 per ton.

U.S. crops have thrived this summer, and the U.S. Department of Agriculture last week projected a record harvest of soybeans and a near-record corn crop.

However, both crops have been developing two to three weeks late due to cool summer weather, leaving them vulnerable to a September frost that could cut yields.

In its weekly crop progress report on Monday, USDA said only 12 percent of the U.S. corn crop was mature, well behind the five-year average of 37 percent. USDA said 17 percent of the soybean crop was dropping leaves, a sign of maturity, lagging the five-year average of 36 percent.

"You've got 30 percent of the North Dakota corn that is still not into (the) dough (stage). If that gets frosted here in 10 days, it makes zero corn. It will all become silage," said Roy Huckabay, an analyst with the Linn Group in Chicago.

The grains rally began after one weather forecasting model, the U.S. model, projected a cold spell in the middle to late part of next week that could produce frost and light freeze conditions in northern portions of the Corn Belt.

That forecast was enough to prompt commodity funds and other speculators to cover short positions, especially in corn, triggering the rally.

Corn futures have been under pressure in recent weeks as prospects improved for a bumper U.S. crop, leaving the market open to a short-covering bounce.

But Mike Palmerino, agricultural meteorologist with DTN Meteorlogix, downplayed the frost threat.

"I would say we would see potential for some cooler weather, but not cold enough to produce any frost or freeze conditions during the middle part of next week," Palmerino said.

Traders were also cautious about the outlook.

"There is a possibility of frost Sept. 26 or 27 but it is just the American weather model that shows that, so it's pretty iffy," said Paul Haugens, vice president for Newedge USA.

WHEAT PRICES FOLLOW THE RALLY

CBOT wheat rallied along with corn and soybeans, shrugging off pressure from a global supply glut and news that Egypt snubbed U.S. wheat at its latest tender.

Exports to big buyers such as Egypt have become critical in view of the increased surplus expected this season after a second year of bumper crops in the Northern hemisphere.

Egypt on Tuesday bought 240,000 tonnes of Russian wheat, which was priced below most offers of French, U.S. and Canadian grain.

Bearish wheat fundamentals were reinforced as Australia upped its 2009/10 wheat crop forecast by 3.4 percent to 22.72 million tonnes, after rains boosted crops in the top producing state of Western Australia as well as southern Australia. Prices at 12:16 p.m. CDT (1716 GMT)

Pct 2008 YTD

Last Change Chg Close Pct Chg --------------------------------------------------------------- CBOT corn 3.4775 0.3000 9.4 4.07 -14.6 CBOT soy 9.6250 0.5350 5.9 9.7225 -1.0 CBOT meal 301.30 18.00 6.4 300.5 0.3 CBOT soyoil 0.3436 0.0096 2.9 0.3329 3.2 CBOT wheat 4.7675 0.2275 5.0 6.1075 -21.9 CBOT rice 13.3000 0.1350 1.0 15.34 -13.3 EU wheat 121.25 2 1.7 137 -11.5 US crude 70.13 1.27 1.8 44.60 57.2 Dow Jones 9667 41 0.4 8776 10.2 Gold 1004.30 5.65 0.6 878.20 14.4 Euro/dollar 1.4638 0.0011 0.1 1.3978 4.7 Dollar Index 76.6140 -0.0810 -0.1 81.1510 -5.6 Baltic Freight 2431 -19 -0.8 774 214 ---------------------------------------------------------------- In U.S. dollars, front-month contracts, except EU wheat, which is in euros, CBOT wheat, corn and soybeans per bushel, rice per hundredweight, soymeal per ton and soyoil per lb.