Aug. 11 (Bloomberg) -- Corn and soybean crops in the U.S., the world's largest producer, probably avoided the flood damage investors anticipated in June as warm weather dried out fields, analysts estimate a government report will show.

The U.S. Agriculture Department surveyed 9,000 farmers in Iowa, Illinois and Missouri last month, after floods receded, as part of a monthly crop report slated for release tomorrow. The USDA probably will forecast a corn harvest of 11.939 billion bushels, 1.9 percent more than estimated in July, according to the average estimate of 23 analysts surveyed by Bloomberg.

The floods sent crop prices surging, with corn more than doubling from a year earlier to a record $7.9925 a bushel in Chicago June 27 and soybeans reaching an all-time high of $16.3675 a bushel July 3, an increase of 92 percent from a year earlier. Corn plunged 36 percent since then and soybeans are down 28 percent, easing concern over accelerating food inflation and pressure on the government to reduce ethanol production.

``It certainly has helped allay the fears,'' said Terry Francl, the senior economist for the American Farm Bureau Federation, the largest U.S. farmers' group. The Washington- based association said in June crop damage would reach $8 billion. ``We're in a situation that is not as extreme as we envisioned only six weeks ago,'' said Francl, who declined to provide a new estimate.

The worst Midwest floods in 15 years killed at least 24 people and inundated more than 3.4 million acres. Water-logged fields destroyed crops and threatened to increase food prices already forecast by the USDA to rise as much as 5.5 percent this year, the most since 1989.

Conditions Improve

On June 22 during the height of flooding, the USDA said 59 percent of the corn crop was in good or excellent condition, down from 73 percent at the same time in 2007. For soybeans, it was 57 percent compared with 66 percent. As commodity prices surged, farm groups called for government aid and lawmakers concerned called for relaxation of government requirements for corn-based ethanol.

``The recent flooding in the Midwest has created devastating crop losses, and these record corn prices will continue to climb,'' Representative Robert Goodlatte of Virginia, the top Republican on the House Agriculture Committee, said in a June 30 statement. Goodlatte was one of 51 lawmakers who called for the government to relax a requirement for 9 billion gallons of corn-derived ethanol this year. The Environmental Protection Agency denied the request Aug. 7, citing falling commodity prices.

Investor Outlook

Corn and soybeans plunged as fewer investors bet conditions in the Midwest would deteriorate. Long positions in Chicago corn futures held by hedge funds and other large speculators outnumbered short positions by 226,148 contracts on Aug. 5, down 37 percent since June 10, while net-long positions in soybeans fell 32 percent to 85,471 contracts, data from the Commodity Futures Trading Commission showed last week.

As of Aug. 3, the crops were in better shape than a year earlier. The USDA on Aug. 4 said 66 percent of corn was in good or excellent condition and 63 percent of soybeans got the highest rating, compared with 56 percent for both last year.

Higher temperatures in July and less rainfall boosted yields of undamaged plants and gave late crops a chance to develop quickly, said Harry Hillaker, the climatologist for the state of Iowa, where July temperatures averaged 73.8 degrees Fahrenheit (23.2 Celsius), matching normal levels.

Corn for December delivery fell 3.25 cents, or 0.6 percent, to $5.15 a bushel on the Chicago Board of Trade as of 1:43 p.m. Singapore time, while soybeans for November delivery lost 6.25 cents, or 0.5 percent, to $11.7425 a bushel.

`Looking Good'

Timely rains and mild weather have been ``a real blessing,'' said Gary Thien, co-owner of Thien Farm Management, which oversees about 26,000 acres in western Iowa and eastern Nebraska. ``The beans are looking pretty good and seem to have weathered the poor start.''

The USDA on July 29 rejected pleas from grain users including Tyson Foods Inc. and Bunge Ltd. for the government to release more land from the Conservation Reserve Program without penalty to the property owners. Agriculture Secretary Ed Schafer said Midwest flooding harmed crops less than originally thought.

Late planting means crops remain vulnerable to an early frost, especially soybeans, Francl said. The USDA probably will cut its forecast of the soybean crop by about 0.2 percent to 2.993 billion bushels, according to the Bloomberg survey.

For now, farmers may have dodged a bullet, Francl said. ``We've offset some of the damage,'' he said.

The USDA will issue its crop report tomorrow at 8:30 a.m. in Washington.

To contact the reporters on this story: Alan Bjerga in Washington at abjerga@bloomberg.net; Jeff Wilson in Chicago at jwilson29@bloomberg.net.

Last Updated: August 11, 2008 02:13 EDT