INDIANAPOLIS (AP) -- The U.S. Department of Agriculture is cutting its estimates for Indiana's corn and soybean production following a late summer dry spell that hurt both crops.

The agency's crop report released Friday cuts the state's expected corn harvest to 866.7 million bushels, or down 10.7 million bushels from its Aug. 1 prediction.

Indiana's soybean crop, meanwhile, is expected to be 238.6 million bushels, or down 16.6 million bushels from the August report.

The Ag Department says an August dry spell hurt Midwestern soybeans and late-developing corn. Many of Indiana's corn and soybean fields were planted late this year due to a wet spring and June flooding.

U.S. corn production will be 12.1 billion bushels, down from its 12.3 billion estimate last month, the USDA said. The soybean crop is projected to be slightly lower, at 2.93 billion bushels, down from its earlier estimate of 2.97 billion.

While the predicted corn crop will be 8 percent below last year's, it would still be the second largest on record. The soybean crop would be 13 percent higher than last year's and the fourth largest ever.

That represents a turnaround from earlier this summer, when some analysts feared the Midwestern floods in June had devastated the crops and would make already-expensive agricultural commodities even pricier.

But commodity traders and agricultural experts said rains from Hurricane Ike could throw off the estimates.

This month's report is only the second of the USDA's reports this year to include actual field visits and farmer surveys, which analysts consider more reliable.

The reports are closely watched by companies that use corn and soybeans for livestock feed, such as Tyson Foods Inc., Pilgrims Pride Corp. and Smithfield Foods Inc., and ethanol producers such as Archer Daniels Midland Co.

Commodity prices rose in reaction to the report, with corn for December delivery trading 30 cents higher to $5.64 a bushel on the Chicago Board of Trade and soybean futures up 27 cents to $12.03 a bushel.

While the USDA expects a large corn harvest, demand from exports and ethanol companies also remains high.

The USDA estimates that will keep end-of-season corn stocks low, at slightly over 1 billion bushels, much lower than last year's stockpile of nearly 1.6 billion.

The smaller reserve will likely keep corn prices at their current elevated levels, said Joe Victor, vice president for marketing at Allendale Inc., a commodities broker based in McHenry, Ill.

The USDA, for its part, increased its price estimates for corn and soybeans. It projected the season-average price for corn will be between $5.00 and $6.00 per bushel, up 10 cents from last month, while soybeans will be between $11.60 and $13.10 per bushel, also 10 cents higher.

Rains from Hurricane Ike, expected in the upper Midwest next week, could stall the development of corn and soybeans, University of Illinois agronomist Emerson Nafziger said.

"Without sunshine, it's sort of like an engine without gas out there," he said. "You can't really make any yield."

But looking at Friday's report, Nafziger believes the USDA already factored that possibility into its numbers.

Brad Rippey, an agricultural meteorologist at the USDA, said that Ike could harm cotton crops in Texas but would have only a limited impact on farms nationwide.

The report was prepared before Hurricane Gustav hit Louisiana earlier this month. Rippey said Gustav's main impact was also mostly on cotton crops. Rains from the storm probably helped corn growers in Illinois and Michigan, he said.

The June Midwest floods sent corn prices to record highs of almost $8 a bushel this summer, up from just over $3 in early 2007, while soybeans jumped to above $16 a bushel, from $6.30 in early 2007.

But the USDA said last month that "nearly ideal" growing weather has helped Midwestern farmers recover.

Associated Press Writer David Mercer in Champaign, Ill., contributed to this report.