Soybean futures look a better bet than corn futures, analysts at both Australia & New Zealand Bank and Societe Generale said, despite ideas that improved weather is reviving US soybean yields.
The failure of Chicago corn prices to rise - despite a cut on Friday of more than 20 bushels per acre, to 123.4 bushels per acre in the US Department of Agriculture's forecast for the crop - "is telling", ANZ analysts said.
"Short-term event risk for grains has diminished," the bank said, noting that, with the crop's vulnerable pollination period now all but over, "the key period determining US corn yields has passed".
"With a lull in catalysts now likely over the next month until the September USDA report and current weak US Gulf corn basis, grain prices are likely to have peaked for the current quarter."
Separately, Societe Generale lowered to "neutral" its rating on corn futures, cautioning over the prospect of reduced demand from ethanol plants as the US summer driving season ends, leaving "an already weak US domestic gasoline market is set to see seasonally lower demand into year-end".
Furthermore, export demand has "severely waned", sapped by corn prices which remain at historically-elevated levels and by competition from Brazil, where farmers have enjoyed a record harvest of safrinha, or second crop, corn.
"Basis at the US Gulf has dropped dramatically in recent weeks with no meaningful end in sight," SocGen analyst Christopher Narayanan said, adding that "Brazilian corn remains the most competitively-priced origin".
And the experience of futures in previous years of disappointing corn crops suggested that declines in corn prices may lie ahead.
"It is interesting to note, especially in 1988 and 1996, that the December [Chicago corn] contract typically saw an end-of-summer high and factored in demand destruction into year-end, taking pressure off prices."
'Rationing not apparent'
However, SocGen remained upbeat over prospects for soybeans, noting resilient exports, and strong domestic demand evident in industry data on Tuesday showing a bigger-than-expected US crush last month, of 137.4m bushels.
"Soymeal demand remains strong," Mr Narayan said, flagging the boost from weakened supplies of distillers' grains, a byproduct of ethanol production used as a high protein feed, and whose output has waned with US manufacture of the biofuel.
"We continue to monitor the cash soybean market for signs of demand rationing.
"Given the fact that such an indication is not yet apparent, we remain bullish on soybean prices and, in our view, the highs are not yet in."
'May be misjudging drought impact'
The comments contrast with caution among investors, amid ideas of reviving US soybean yield potential, after rains fostered an uptick in the official condition rating of the domestic crop in the week to Sunday, the first upgrade since this season's ratings began two months ago.
"The corn market seems confident that poor yield reports will continue, while soybean traders are more guarded on how new crop soy yields will track relative to expectations," Richard Feltes at broker RJ O'Brien said.
However, ANZ said that the "market may be misjudging US drought impact" on soybeans, and recommended investors "to position for the next upward leg" in prices.
"The market needs to ration a record amount of supply before the next South American crop in early 2012. We maintain a bullish outlook for soybeans," the bank said.