Analysts cautioned investors against expecting the reversal in grain and oilseed prices continuing too far even as they suffered a further day of sharp losses, with wheat futures plunging 6% on both sides of the Atlantic.

Wheat prices took their correction in Chicago this week nearly to 10% at one point, while both corn and soybean futures fell temporarily by their daily limit.

The tumbles were attributed to profit-taking stoked both by weak external markets - as rising Italian and Spanish bond yields fuelled eurozone debt fears and overcame a temporary boost to sentiment from Chinese factory data – and greater prospects for much-needed rainfall in the Midwest.

The GFS model looks "very wet" in the six-to-10 day and 11-to-15 day outlooks, WxRisk.com said.

'Strong disagreement'

However, the European model, which traders have regarded as more reliable in the recent drought, is "in strong disagreement", promoting a drier outlook, the weather service add

"Nebraska, Iowa , Missouri and Illinois may miss out on heavy, soaking rains, though scattered showers are still indicated with variable amounts from 0.25-1.25 inches."

The "normal" rainfall expected next week by the Climate Prediction Center would, at 1 inch per week in the Midwest in July, "not be enough to cure drought since in last month alone", during which large areas of states including Iowa, Illinois and Nebraska have clocked moisture deficits of 3-4 inches.

'Bullish view'

Furthermore, a round of broker upgrades to forecasts for futures continued, with Macquarie refining a forecast on Monday of higher soybean values by saying that a price of $19-20 a bushel was a "very real prospect in the near term", as was $9-10-a-bushel corn.

"We take a bullish view on the flat price," the bank said, noting the "devastation" to Midwest crops evident in falling condition ratings out overnight from the US Department of Agriculture.

At FCStone, commodity risk manager Jaime Nolan Miralles said: "That we see prices fall yesterday and once more today should not leave bears in the market with a false sense of security.

"The market has been due this correction and there is still much grain sitting in the field exposed to significant downside variation on yield potential, should weather fail to deliver a sustained alleviation in crop stress across the grains and oilseed complex."

US Commodities said: "Is the top in? Most people believe this is just a correction."

At Rice Dairy, Jerry Gidel said: "Let me know if the top has actually gone into the market. What we have seen so far is actually not that bad for a two-day correction."

'Nearly impossible to ration'

Macquarie's upbeat assessment factored in a yield of 39.5 bushels per hectare, 1.0 bushels per hectare below the USDA estimate, and the difficulty of quelling Chinese demand "which is nearly impossible to ration", given government imperatives for maintaining ready supplies of pork.

Furthermore, the outperformance of corn prices over soybean prices in recent weeks questioned ideas that Brazilian growers will increase sowings of the oilseed quite as much as some analysts have suggested.

"Through the rally in prices in the last month corn has been the clear outperformer, as the soy: corn ration has fallen significantly," the bank said.

"The decision has moved from being approximately $200 per hectare in favour of planting soybeans to be approximately $150 per hectare of planting corn."

"This is putting at risk 1m hectares of soybean plantings in the region, the equivalent of 3-3.5m tonnes of production."