* Lower-than-expected U.S. corn yields driving prices
* Market expects yields to be lower than USDA estimate
U.S. corn futures broke through the psychologically important $5 per bushel mark for the first time in nearly two-years in Asian trade on
Friday on worries over U.S. crop yields and expected strong demand.
Chicago Board of Trade (CBOT) corn for December delivery gained 1.81 percent to $5.05 per bushel by 0653 GMT.
"The possibility of lower yields combined with the threat of larger export demand is enough to keep driving corn prices higher," said
Brett Cooper, senior manager of markets at FCStone in Sydney.
"Passing through $5 is an important psychological level - there's no doubt about that, but I think the background still remains that while
yields have started to improve, the market will anticipate further cuts in the final yield."
Cooper said some in the trade were now thinking yields will be around 160 bushels per acre compared with the 162.5 bushels per acre
estimated by the U.S. Department of Agriculture (USDA) in its Sept. 10 supply and demand report.
Yields have been hurt by hot, dry weather across the U.S. corn belt last month. Finishing weather was not conducive to filling out corn
in southern and eastern areas.
Price support is also coming from demand for U.S. corn rising as importers of livestock feed look for sources of the grain outside the drought-stricken Black Sea region.
The emergence of China as a significant buyer of U.S. corn has also supported prices.
China could be forced to import more corn than expected as bad weather in some of its corn-growing areas may eat into domestic production. China's weather bureau forecast frost in parts of the country's major corn areas in the northeast, including Jilin, the top corn
area.
"It is too early to say whether frosts will affect corn crops but anyway China will have to buy corn from the U.S.," said Benson Wong, a senior advisor at Commodity Broking Services.
"The whole income of the country is increasing so that means more demand for meat so there's rising need for livestock feed."
China suddenly returned to importing U.S. corn this year after a four-year hiatus.
It has already bought 1.3 million tonnes of corn this year, the highest in 15 years.
"I am still strong on corn because imports from China will increase," said Wong.
Australia & New Zealand Banking Group's London-based commodities analyst Scott Briggs said in a market note that ANZ was generally bullish on corn with early U.S. yields poor and 2011/12 stocks potentially even tighter than 2010/11.
Still, corn prices were at the point where a breather was needed, as least for a week or so, Briggs said,.
"While impressive, it's starting to look a little too toppy for our liking -- well into overbought territory on an RSI basis," he said.
Corn's relative strength index is at 92, according to Reuters data. RSI above 70 is considered overbought and under 30 is considered oversold.
U.S. wheat futures rose more that 1 percent, recovering Thursday's losses as focus returned to tightening world supplies after a dip in U.S. exports last week sparked a sell-off in the previous session.
Canada is set to reap a smaller harvest following record rains in spring leaving millions of acres unplanted while dryness is continuing in the Black Sea region that may limit the planting of the 2010/11 crop.
"Everyone is looking at the world's ending stocks because demand is still there but supply is a bit of an issue," said Wong.
Wheat for December delivery surged 1.77 percent to $7.32 per bushel, after falling just over 1 percent on Thursday, following the USDA report that showed net export sales of all U.S. wheat sank 80 percent to 319,600 tonnes last week from the prior week's reported threeyear
high in sales.
The contract briefly rose more than 2 percent to a high of $7.37-1/4.
Soybeans for November delivery rose 1.28 percent to $10.49-1/2, regaining ground lost on Thursday when traders took profits after prices hit a one-week high of $10.50-1/4.
Although the United States is expected to reap a record soybean crop this year, Briggs said dry weather in South America could threaten plantings in the key soy producing region.
Sustained rain is needed over the next two to four weeks for the planting of good size crops in Brazil, the No. 2 soybean exporter after the United States.