Supply fears drive corn above $7; cotton to record

MARKETS-COMMODITIES/ (UPDATE 2)

* Agriculture markets rally as US cuts crop estimates

* Corn above $7; cotton at 150-year highs

* Oil ends mixed, copper down

* Coming up: US weekly jobless claims on Thursday

(Recasts and updates prices and market activity throughout to close of U.S. session; changes dateline, previously LONDON/SINGAPORE)

NEW YORK, Feb 9 (Reuters) - Agricultural markets blazed to a higher finish on Wednesday, with corn surpassing $7 the first time since 2008 and cotton hitting a 150-year top, on fear of tight supplies after the U.S. government cut crop estimates.

Wheat, soybeans and cocoa were other major gainers, helping the 19-commodity Reuters-Jefferies CRB index rise more than half a percent.

"They say a bull market needs to be fed, and we certainly got fed here today," Rich Nelson, an analyst at Allendale Inc in McHenry, Illinois, said, referring to government agricultural reports that served as catalyst to the rally.

Oil prices settled mixed, falling in New York after data showed a weekly rise in U.S. stockpiles, and rising in London on fear of disruptions to energy supplies from the unrest in Egypt. Copper ended lower too as investors questioned the sustainability of record high prices.

Analysts said U.S. weekly jobless claims numbers on Thursday were likely to decide the direction for oil and metals as investors try to determine if the economy was recovering enough to support the recent run-up in prices.

The corn market took off after the U.S. government slashed its estimate of corn stockpiles by 9 percent, a move that could force end-users to scale back their use of the grain.

"That does create an increased sense of anxiety from the end user's perspective," said Shawn McCambridge, analyst at Prudential Bache Commodities in Chicago.

The United States is the world's top exporter of corn.

Inventories of U.S. corn are forecast to hit a 15-year low and the ratio of stocks to use would drop to the lowest level since the Great Depression.

The drop in corn stocks stemmed largely from the government slightly raising its estimate of U.S. corn used for ethanol.

"It looks like (corn for) ethanol production certainly won out" versus corn for food, said Allendale's Nelson.

Front-month U.S. corn for March settled up 3.6 percent, or 24-1/4 cents, at $6.98 per bushel after spiking above $7.

Wheat and soybeans rose more than 1 percent each, rallying along with corn.

Cotton futures hit their highest levels in more than a century on investment fund and speculative buying in heavy volume. Analysts said momentum could push prices even higher in coming days.

Front-month cotton for March rose 3 percent, or 5.29 cents, in New York to conclude at $1.8058 per lb, a record settlement close for the market.

The runaway cotton market has been the best performing commodity on the Reuters-Jefferies commodity index in 2011, having risen 25 percent. Last year, cotton was also the top performer rallying 90 percent.

On the energy front, U.S. crude for March ended 23 cents lower at $86.71 a barrel after government data showing gasoline inventories at a 20-year high.

Brent crude finished up $1.90 at $101.82 after reports that protesters in Egypt were working on a plan to move on to the state radio and television building on Friday, the day of the next big scheduled demonstration demanding that President Hosni Mubarak step down.

Concerns that protests in Egypt could spread to oil producing countries in the Middle East have caused crude prices to rally of late, although the Suez Canal -- which Egypt controls and crude passes through -- has not been affected. Prices at 5:20 p.m. EDT (2220 GMT)

(Source: http://www.forexyard.com/en/news/COMMODITIES-Supply-fears-drive-corn-above-7-cotton-to-record-2011-02-09T222707Z)