Which crop is the better bet, corn or soybeans?

Analysts pretty much gave up on wheat futures leading any charge in Chicago, after the US Department of Agriculture on Monday, in a much-watched report, lifted its forecast for Canadian and European Union exports, at America's expense.

US wheat inventories now look like ending 2011-12 at 20.7m tonnes, 1.45m tonnes higher than previously thought, the USDA said, lifting its estimate for world stocks too.

"The USDA report was directly bearish for wheat prices," Luke Mathews at Commonwealth Bank of Australia said, in comments which could be attributed to any number of analysts.

Short term vs longer term

However, corn and soybeans both found favour, despite the surprise uplift by the USDA to its estimate for domestic production of the oilseed.

The revision did not throw Goldman Sachs into reversing its championing of soybeans last week.

OK, corn, for which the USDA cut its domestic yield estimate more than the market had expected, looked set to outperform both soybeans and wheat "in the short-term".

However, its price prospects looked "capped" at about $8.00 a bushel, when "the potential for large ethanol demand destruction" kicks in.

Soybeans, while presenting a "near-term bearish" outlook, have "long-term upside potential" thanks to the prospect for harvested acres turning out smaller than the USDA has so far factored in, following flooding around the Missouri river earlier this year.

La Nina threat

Furthermore, there was the looming risk of a renewed La Nina weather pattern, which typically brings overly dry weather to major South American soybean areas.

"The return of La Niña weather conditions that are expected to gradually strengthen into this winter poses further downside risk to South American production," Goldman said.

"We see growing potential for sharply higher soybean prices over the next 12 months," the bank added, reminding also of the potential for the oilseed's relatively low price compared with corn to place it out of favour in growers' sowing schedules.

Tail-end exports

However, Rabobank sided with corn versus soybeans, saying that higher inventories of the oilseed, and not just in the US, "will likely weigh on prices and maintain the Chicago soybean-to-corn price ratio at subdued levels".

"A higher-than-normal level of soybean stocks, particularly in Brazil, was held on-farm from the 2010-11 harvest, allowing for a larger volume of tail-end exports," the bank said.

Brazilian exports, which hit a record 3.36m tonnes in August, will remain at all-time highs, "as farmers have been incentivised to sell by the recent rally in Chicago soybean prices and a decline in the Brazilian real".

These dynamics "will likely pressure Chicago soybean prices, causing them to fall below $14 per bushel and likely keeping the soybean-to-corn price ratio low".

In Chicago itself, there was no clear victor between the crops as of 10:30 GMT, when soybeans for November were 0.5% lower at $13.88 ½ a bushel, and December corn down 0.4% at $7.42 ½ a bushel.