The scramble by speculators to buy into the crop complex last month has created an overhang of positions which has heightened its vulnerability to a correction, Australia & New Zealand Bank warned.

The comments came ahead of dramatic rebound by food commodities, which had posted steep losses in early deals on Wednesday.

Last month's crop rally, which saw most of the major US-traded crops gain at least 10%, with Chicago corn and New York raw sugar enjoying surges of more than 20%, was fuelled by buying by speculators which had "perhaps slipped under the radar", ANZ said.

Of the 14 major farm futures on US exchanges, all but one, Chicago live cattle, attracted net buying by speculators, whose net long positions in farm commodities overall had returned to a record high.

"Ag markets are starting 2011 with the bases loaded," the bank said, highlighting a "major risk of a sell-off if outside markets turn".

'Bit ahead of themselves'

The comments came as crop markets staged a strong recovery, after earlier looking on course to post a second successive day of broad and deep declines.

Oil rebounded 1.6% nearly to $91 a barrel.

"The markets may have got a bit ahead of themselves last month," a London analyst said, while remaining sanguine about prospects.

However, it was "not as if the fundamentals have changed - or if anything, they have changed for the worse in production terms".

Indeed, the themes if Australian deluges, Argentine dryness and strong Chinese demand for food commodities, which ANZ identified behind the December rally, would appear to remain intact.

Most popular buys 

The bank noted particularly "impressive" buying by speculators in wheat last month, with their position changes from net short of 49,000 lots at the start of the month to net long of 10,000 contracts at the end.

For soyoil, speculators' net long position – that is the total for long positions, which profit when prices gain, minus the shorts put in the money by price losses – surged by 41% to 80,000 lots in a month.

However, while net longs in sugar rose by 39,000, the total of 202,000 remained well below the record of 303,000 lots witnessed in February 2008.

ANZ analysts use a broader definition of speculators than some other observers, combining the "net managed money", "net other" and "net non-reportable positions" criteria published in weekly reports from US regulators on investors' positions.