The fact that corn prices have doubled from a year ago, to more than $7 a bushel, is squeezing livestock feeders and forcing meat prices higher. Some traders in Chicago have placed bets on a continued rally that may make current prices look like a relative bargain.

Earlier this week, traders held more than 4,500 call options in CME Group’s corn market at strike prices of $11 and $12 a bushel. The number of such positions was up 15 percent from a month earlier, an indication of growing concern that this year’s harvest will fall short.

Before last year, corn call options hadn’t ever reached such lofty levels, veteran Chicago traders say. But concern over shrinking grain supplies has intensified this summer as a Midwest heat wave hit corn during its crucial pollination phase, making a $10 or higher corn price a possibility.

Kevin Van Trump, who runs Farm Direction, in Kansas City, says $9 or $10 corn could happen. “There is a lot of talk now that the USDA will need to lower yields even further,” he said in an Aug. 24 report. “The bottom line is that with yields continuing to shrink and thoughts that fewer acres will be harvested, the trade simply sees very few options but to continue adding more premium to current prices.”

Corn futures traded at the CME have already climbed to the highest levels in over three years, extending the rally this week as the Pro Farmer crop tour through the Midwest revealed many heat-damaged fields.

Based on the tour results, Pro Farmer analysts estimated the corn yield will average 147.9 bushels an acre nationwide, the consulting firm said on its website. Pro Farmer’s estimated yield is 3.3 percent below USDA’s current forecast of 153 bushels an acre and would be the lowest U.S. yield since 2005.

Corn futures indicate prices will remain above $7 a bushel through at least the middle of next year. Some traders in the options market apparently have had even more of a bullish posture.

Last fall, $10 corn call options traded for the first time, with large trading firms including JPMorgan Chase & Co. and MF Global Holdings Ltd. among the buyers of those calls, according to CME traders. It’s unclear who holds the more-recent positions in $11 and $12 calls, which traded in contract months including December 2011, as well as March, May, July and December 2012. According to a CME spokesman, $12 corn calls traded for the first time in February.

Whether corn gets anywhere close to $11 or $12 remains to be seen, but the prospect of even higher prices is sure to send shudders through the pork, beef and poultry industries, where profits have nearly evaporated as feed costs rose this year.

If corn rose to $10 or higher, there would be severe implications for the beef and pork industries, with many producers probably forced to liquidate herds as losses grew. In 2008, a corn price spike combined with the recession triggered a previous round of herd contraction.

 Corn at $10 “will put a lot of sows in packing plants,” University of Missouri economist Ron Plain says.