Patience is likely to pay off in corn, blessing investors with higher futures prices and farmers with a better cash market.

Darrel Good, agricultural economist at the University of Illinois, said that growers able to store corn until the spring looked likely to rewarded by about $0.30 a bushel for storage costs, as the immediate pressure on cash prices wears off.

Besides selling from the newly-begun US harvest, prices are being depressed by the rush by farmers to clear silos of last year's harvest, which was generally of lower quality.

Bag solution

"The current price structure favours selling corn for later delivery," Mr Good said, noting that corn sold straight from harvest to central Illinois was worth $0.68 a bushel less than if delivered against Chicago futures contracts in July next year.

"That basis is likely to strengthen to about $0.20 [a bushel] under by next spring, offering a return of $0.48 a bushel for storing corn for nine months," he said.

He estimated the loss of interest payments on delaying sale at $0.30 a bushel.

The report comes as many farmers are reported to be using industrial plastic bags to increase their storage capacity.

"Typically used for storing silage, corn kernels will now be encapsulated in an airtight seal at a cost of roughly $0.12 a bushel," Kevin Kjorsvik at Benson Quinn Commodities said.

'Significant strengthening'

The comments followed an upgrade by Rabobank to its estimates for Chicago corn futures, noting firm US exports and persistent doubts that America's crop will hit the 165.0 bushels per acre that the market expects.

"Fundamental risks appeared skewed to the upside," the bank said, forecasting that prices would remain substantially above $4 a bushel until at least the second quarter of 2011.

 "We expect the demand pull from world feed grain markets, together with the [US] domestic ethanol industry, to result in a significant strengthening in prices across the forward curve as the season progresses."

While prices may come under pressure from harvest sales over the next 6-8 weeks, fallbacks towards $4.00 a bushel "should be seen as buy opportunities for commercial end-users looking to seek forward coverage".

Extrapolation danger 

Mr Good also warned that the corn price rally faced obstacles, flagging the levels of $4.50 a bushel which the December contract had last approached in January, before bearish US Department of Agriculture data sent crops into reverse.

"Those early highs near $4.50 may provide some resistance for the current rally unless prospects for a smaller crop are confirmed," he said.

Investors should take with caution forecasts for a weak US crop based on early yield reports.

"It is a little dangerous to base expectations on early results because the driest areas tend to be harvested first."

Chicago corn for September closed 1 cent lower at $4.24 � a bushel, with the December lot losing 2.25 cents to end at $4.39 � a bushel.