Corn looks the best short-term bet for Chicago investors, although weaker soybean prices offer the chance to exploit the oilseed's bullish long-term prospects, Goldman Sachs said.

The world corn market will tighten in 2009-10 despite raised forecasts for US corn inventories, with global corn stocks falling as a percentage of consumption, a key measure of the squeeze on supplies.

And it will "remain tight" in 2010-11, with the world stocks-to-use ratio falling further, as biofuel usage swallows extra grain.

Furthermore, US corn production may fall short of forecasts, with Goldman research suggesting a yield of 156 bushels an acre this year, assuming average growing conditions, a lower figure than other analysts are factoring in.

'Favour long positions'

"We maintain that corn price risk remains skewed to the upside from current levels," Goldman said, leaving its forecast for prices in 12 months at $4.75 a bushel, some 15% higher than futures are pricing in.

However, the bank said it expected "little upside" from the agricultural commodities complex as a whole, highlighting that the wheat market's "soft fundamentals" were likely to extend into the next crop year.

Wheat prices are being undermined by, besides strong production, a dearth of exposure to biofuels markets and sluggish growth in food demand, the bank said.

Soybeans' 'compelling drivers'

Soybean prices too were likely to come under pressure, thanks to a strong South American crop and a potential rise in US plantings.

Goldman said it saw "downside risk" to a forecast of soybean prices hitting $9.50 a bushel in six months' time, a modest premium to September futures values.

Nonetheless, with developing country demand for soybeans on the rise, the bank advised investors to "position for future strength" by snapping up soybeans at low levels expected this year.

"We believe that over the medium-to-long term soybean offers the most compelling drivers, as expected strong demand growth from emerging markets will likely leave the market particularly sensitive to negative supply shocks," Goldman said.