The chapter isn't yet closed on this year's surge in food crop prices following the worst drought in the U.S. in over 50 years.
South American supplies have helped offset a decline in U.S. grain and oilseed stocks but if weather conditions deteriorate in the region, crops there may be hit and prices could resume their uptrend, analysts warned.
Next year's soybean crop in southern Brazil appears less promising than it did a few months back, as the likelihood of an El Nino phenomenon bringing above-average rainfall in early 2013 has diminished, Dow Jones Newswires reported on September 26, citing weather forecaster Somar Meteorologia.
The agricultural commodities complex performed strongly on Thursday with corn futures in Chicago hitting three-week highs after monthly U.S. Department of Agriculture (USDA) data slashed its forecast for global stocks and estimated the drought-plagued U.S. corn crop will be the smallest in six years.
Soybeans gained for the first time in five sessions after the USDA figures showed a stocks-to-use ratio that would be the tightest since the mid-1960s while wheat jumped 1.7 percent for the fourth straight session of gains on lower estimated wheat production in Australia, Russia and the European Union.
Though the USDA data generated "renewed bullish momentum" for crop prices, the gains won't be strong enough to take out the highs reached in the third-quarter, wrote Rabobank analysts led by Luke Chandler. Price direction will now largely be determined by weather conditions outside the U.S., they said.
"This will continue to keep the markets on edge as any sign of adverse weather, primarily in South America, will drive prices higher. Risks remain elevated for price rallies if the South American weather outlook deteriorates, " according to Rabobank.
(Read More: Massive US Drought Leads to Worst Fears for Corn Crop )
An adverse shift in South American weather is likely to quickly push soybean prices back above $16 a bushel on the Chicago Board of Trade (CBOT), they said.
Christopher Narayanan, Societe Generale's head of agricultural commodity research said "beware of soybean rallies." An early-October selloff in soybeans, which sent the oilseed to a three-month low, "seemed overdone given the still-distant South American harvest and its associated risks, " he said
That said, the bank noted global stocks-to-use increased from the September 15.2 percent estimate to 16.2 percent, while the U.S. figure rose slightly from 4.3 percent to 4.5 percent.
The USDA raised its forecast of U.S. 2012/13 soybean stocks to 130 million bushels, from 115 million bushels in September but the stocks-to-use ratio, a gauge of supply tightness, rose to only 4.4 percent, the lowest since 1965/66, Reuters reported.
Furthermore, USDA Foreign Agricultural Service estimated Brazil's 2012/13 soybean production at a record 82 million tons.
"We still expect to see a rebound in global inventories assuming no drought-like issues with the South American crop, " Narayanan said.
"We don't expect to see sharply higher prices from these levels unless production in South America disappoints. We recommend staying nimble in soybean trades without adding undue length or being overly short until more clarity is gained on demand and future supplies."
- by CNBC's Sri Jegarajah