By Nigel Hunt

Torrential rains have swept across the Midwest, the key growing region in the world's top producer, resulting in floods which have destroyed homes as well as thousands of acres of corn and soybeans.

"The key issue with corn has been the poor weather and flooding in the U.S. Midwest. That has been the main driver in the very short-term for the price spike," said Nicholas Brooks, head of research and investment strategy at ETF Securities.

Front month July rose to a contract high of $7.21-3/4 a bushel on the Chicago Board of Trade while July 2009 set an all-time record peak of $7.71.

Wheat and soybeans also rose early before profit-taking began emerge and July 2008 corn was just 2 cents up at $7.05-1/4 at 1045 GMT.

Brooks said weather had sparked supply problems at a time when inventories were set to reach historical low levels and there was increasing demand to produce biofuel ethanol.

"I would say there is a greater risk of further price increases than a sharp fall in the price given the supply/demand dynamics we are seeing," he said.

LOWER YIELDS

The U.S. Department of Agriculture this week slashed 5 bushels per acre from its estimate for U.S. corn yields per acre because of excessive rainfall and flooding in key corn states like top producers Illinois and Iowa.

"Concerns of a sharp drop in yields have triggered a massive stampede of buying," said Koji Suzuki, a senior analyst at SBI Futures Co Ltd.

Brooks said it now looked as though even those figures might be overly optimistic.

"I think a lot of analysts expect it to be worse than the USDA forecasts," he said.

CBOT soybeans rose early but then fell back as traders began to take profits. July soybeans rose as high as $15.38-3/4 a bushel but stood 6-1/4 cents lower at $15.10-1/4.

Wheat prices on the CBOT also fell back after early strength with July down 10-1/2 cents at $8.58-1/2 a bushel.

European wheat prices remained higher as they adjusted to limit-up gains in U.S. markets on Wednesday.

November milling wheat in Paris stood 0.75 euros higher at 205.75 euros but slipped back from an early peak of 211.25 euros.

CBOT rough rice futures were also clinging onto gains but had fallen well below the day's peaks with July up 0.01 at $19.94 per hundredweight after earlier touching $20.33.

(Additional reporting by Miho Yoshikawa in Tokyo and Niu Shuping in Beijing)

(Editing by Christopher Johnson)