With a huge US crop in prospect, corn has found rallies hard to sustain of late.

The latest rebound in Chicago corn futures at least stretched to three days as investors, having had the weekend to chew revisions from the US Department of Agriculture to estimates for the grain, still found them bullish on Monday.

The USDA's Wasde report - in more than offsetting a cut to estimates for US corn exports in 2012-13 with an upgrade to domestic use – "gave a signal that the rationing job on corn is a struggle", broker US Commodities said.

Goldman Sachs concluded that corn was the US main crop with the biggest "upside risk" to prices, while rival Morgan Stanley said that "we expect higher old-crop corn prices in the weeks ahead as the market positions ahead of the March 28 Grain Stocks report", the next key set of USDA data.

Short covering

And rise prices did, by 1.1% to \$7.11 ¼ a bushel for Chicago's best-traded May contract, with the March lot ending up 1.3% at \$7.34 ½ a bushel.

"The market is moving higher in search of a price that may entice, or at least indicate it will work economically, to deliver corn," Darrell Holaday at Country Futures said, a reference to producers' reluctance to sell, particularly at prices below \$7 a bushel.

"The shorts have realised that [producer selling] means a higher price, and are buying any price breaks in an attempt to get out of their short position rather than being forced to deliver as the March contract expires on Thursday."

'Trade is perplexed'

All this is not to say that the Wasde's data are without their critics.

Richard Feltes at RJ O'Brien said that "trade is perplexed that the USDA's 100m-bushel increase in 2012-13 US corn feeding on Friday's crop report was not accompanied by a corresponding increase in domestic US soymeal use".

Corn (or other grain) is typically mixed with soymeal, meaning that more of the grain should mean more of the protein source too.

Still, as a further support to corn values, the USDA acknowledged that a daily alert saying China had bought 345,000 tonnes of US soybeans had been an error, with the announcement meat to comprise 225,000 tonnes of soybeans and 120,000 tons of corn.

OK, the corn was of new crop, rather than the old crop for which export demand has been poor, and on which the export revision would have had maximum impact.

And technically, the May contract signally managed to close above its 50-day moving average, for only the second time in the past month, although baulking at the 75-day line which helped instil a sense of vertigo at the lot's day high at \$7.16 ¼ a bushel.

Corn vs wheat

Corn's rise was a help too to wheat, which faced some potential pressure in further benign weather for US winter grain seedlings.

"Active showers this past weekend further improved moisture for wheat. Warmer temperatures this week will spur growth," weather service MDA said.

However, with corn at an atypical premium to wheat, a reflection of the crops' relative inventory tightness, gains in corn will tend to lift values of the rival grain.

"Wheat does not have tight ending stocks like corn and beans. Wheat will continue to follow the corn market until the bulls can find a good reason to break away," Steve Georgy at broker Allendale said.

'Short-covering could dominate'

In fact, "wheat now looks cheap versus corn," US Commodities said, noting that the amount of soft red winter wheat "being fed is on the rise".

And investors remain wary of the sizeable net short position speculators have in Chicago wheat, which if it is unwound would mean a jump in buying of the grain.

"Since wheat prices have stopped declining recently, in spite of a bearish report from USDA on Friday, short-covering by trading funds could dominate action in wheat futures this week," broker Doane said.

Chicago wheat for May was lifted 0.4% higher to \$7.00 a bushel, not enough to prevent its discount to May corn expanding to \$0.11 a bushel.

In Europe, Paris wheat for May ended up 1.4% at E233.50 a tonne, playing catch up from a relatively weak session on Friday, but London wheat lagged, edging all of £0.05 higher to £198.55 a tonne for May delivery.

'Logistical snarls'

As for soybeans, they received a lift too, despite a Wasde deemed as a little bearish for the oilseed in signalling USDA beliefs of a sharp drop-off in US exports.

US cargo inspections for last week, at 17.1m bushels, were well down week on week, but still larger than the US needs to meet its export forecast of 1.345bn bushels for the full 2012-13.

"The logistical snarls continue in South America," US Commodities said.

"This is expected to result in additional soybean switching from Brazil to the US by China. The delay in loading is now about 60 days."

Soymeal leads

Signally, soymeal was particularly strong, helped by ideas of improved corn feeding meaning more use of the protein too.

Chicago's May contract added 0.7% to \$438.00 a short ton, while May soybeans gained 0.6% to \$14.79 ½ a bushel.

Soyoil lagged, gaining 0.2% to 50.44 cents a pound, following a soft performance overnight in Kuala Lumpur by rival vegetable oil palm oil, which closed up 2 ringgit at 2,449 ringgit a tonne despite data showing a drop in Malaysian inventories.

'Speculators running too short'

Among soft commodities, New York cotton had a mixed performance, with the old crop May contract easing 0.2% to 86.72 cents a pound, amid caution that a fall may be ahead for Chinese imports.

But Goldman Sachs comments helped the new crop December lot gain 0.3% to 86.68 cents a pound.

Still, New York raw sugar for May just outpaced it, adding 0.4% to 18.82 cents a pound, amid continued support from ideas of a beneficial change in Brazilian taxes on ethanol, which would mean prices of the sweetener rising to ensure a big enough share of the cane crop.

Nick Penney at Sucden Financial noted support for prices from "rumours of an imminent announcement of the much heralded abolition of Brazils Pis/Cofins taxes on ethanol".

He also flagged a "market perception that speculators have been running too short in the face of potential logistical log jams which may affect exports at the start of Brazils Centre South harvest", as they have already been doing to soybean shipments.

Managed money, a proxy for speculators, held a net short position in New York sugar futures and options of more than 40,000 lots as of Tuesday.