Too much of a good thing – rain – may wrong-foot investors on Tuesday by persuading Washington farm officials not to raise estimates for South American soybean crops in a key monthly report.

The "common thinking" is that the US Department of Agriculture will follow private analysts in lifting estimates for Argentina and Brazilian soybean harvests in its latest monthly report on global crop supply and demand, Tim Hannagan at broker PFGBest said.

However, the rains that have nurtured hopes for the crop - especially in Argentina, where drought fostered a 31% slump in output last year – may in fact have been too generous, Mr Hannagan said.

Disease threat 

"The extreme levels of rain from El Nino, up to 500% of normal in some areas, have Argentine growers talking of a record [outbreak of] leaf spot disease," Mr Hannagan said.

"Brazil has reported 1,200 cases of Asian rust disease, more than double a year ago."

Heavy rains provide inviting conditions for both leaf spot and Asian rust disease, fungal infections which can cause significant yield losses.

"It seems too early for the USDA to address those problems, but be aware," Mr Hannagan said.

Corn debate 

The comments came as investors prepared for the department's first global crop forecasts since its January 12 report which, in raising estimates for global supplies of the three major crops, sent markets crashing.

However, the USDA is viewed as likely to change its views on American crop inventories at the end of the 2009-10 marketing years, with the corn stocks figure the biggest bone of contention among analysts.

Some analysts believe the department will cut its estimate of US corn inventories by up to 162m bushels, citing some revival in exports, and better prospects for use by livestock farmers, and ethanol plants.

Other analysts, meanwhile, are forecasting an upward revision of potentially 51,000 bushels to the figure, noting estimates of rich harvests in rival producing countries.

Bumper exports

Observers agree on a decline to the USDA's estimate for year-end soybean inventories, noting exports which have remained higher than had been expected, despite the consensus of big South American crops.

The wheat figure is also expected to show a marginal decline, as lower prices help exports.

"Wheat inventories are at record levels so 10m bushels either way goes unnoticed," Mr Hannagan said.