Federal forecasters cut their outlook for the U.S. corn harvest for the second straight month, yet expect high prices to cool demand and prevent supplies from falling to an all-time low next year.

The U.S. Department of Agriculture, in a monthly crop report released Monday, said farmers will produce 12.497 billion bushels of corn, a 3.2% cut from last month's forecast. The harvest is still expected to be the third largest on record, but will fall short of expectations in the spring when farmers planted a huge crop in response to tight supplies and historically high prices.

The production cut was expected after hot, dry weather this summer damaged the crop in states such as Illinois and Indiana. Yet the reduction in expected demand was surprising, with some analysts and traders dismissing it as a way to prevent concerns over shortages by next summer.

"It's easy enough to say we're going to have a reduction in consumption, but whether or not we do is a different story," said Sid Love, analyst for Kropf & Love Consulting, an agricultural advisory firm in Kansas.

Corn prices climbed on the Chicago Board of Trade as traders continued to worry the harvest that is getting underway won't keep up with demand for the world's largest corn crop.

Futures prices already have surged this summer, with corn for December delivery, the most actively traded contract, hitting a high in late August of nearly $7.80 a bushel. Prices have since pulled back but remain up nearly 20% since July, with the December contract closing up 9 cents, or 1.2%, at $7.45 1/2 a bushel Monday.

"To ration demand, prices still need to move higher," wrote analysts for Morgan Stanley.

The USDA had a brighter outlook for the soybean crop. Forecasters surprised traders by raising its prediction for the upcoming crop to 3.085 billion bushels from 3.056 billion in August. The USDA also increased its outlook for domestic wheat supplies, bucking expectations for a slight cut in inventories.

Soybeans for November delivery tumbled 30 3/4 cents, or 2.2%, to $13.96 a bushel. Soft red winter wheat for December delivery slipped 2 1/2 cents, or 0.3%, to $7.27 1/4 a bushel.

Other markets

Soy product futures tumbled with soybeans. December soyoil dropped 1.6% to 57.75 cents a pound, while December soymeal fell 2.5% to a three-week low of $365.80 per short ton.

December ethanol climbed 0.6% to $2.71 per gallon as corn prices advanced, while November rice gained 0.2% to $18.37 per hundredweight. December oats slipped 0.9% at $3.45 per bushel.

At the Kansas City Board of Trade, hard red winter wheat for December delivery stumbled 0.8% to $8.26 a bushel. Hard red spring wheat for December delivery dropped 0.6% to $9.01 1/2 a bushel at MGEX in Minneapolis.