Along with wheat, corn and soybeans are the foundation of the U.S. food supply. They are mixed into livestock rations, milled and crushed to become food and beverage ingredients, and employed as lubricants and feedstocks for motor fuels.

In its first estimate of the fall harvest, the Agriculture Department estimated the soybean crop would be a record 3.199 billion bushels, up 8 percent from 2008, and corn would total 12.761 billion bushels, up 5 percent from 2008 and the second-largest on record.

Bumper crops and lower grain prices will help constrain food prices, said a USDA forecaster. Prices are forecast to rise by a modest 3 percent this year and 3.5 percent in 2010, compared to a 5.5 percent increase — largest since 1990 — in 2008, when grain and oil prices set record highs.

“These crops can be considered firm,” said private consultant John Schnittker, aside from the risk of an early freeze that would end the growing season.

Joe Victor, an analyst for Allendale Inc, said dry August weather “is not a good situation for soybeans” and could result in tighter soybean supplies next summer. The U.S. stockpile is forecast to dip to a barely adequate 110 million bushels before harvest begins in a few weeks.

This year’s soybean crop will sell for an average $9.40 a bushel at the farm gate and corn for an average $3.50 a bushel, USDA said. Both would be lowest in three years.

Market prices for corn are below the USDA forecast. USDA said many farmers sold corn in advance of a sharp downturn in cash and futures prices in early June.

At the Chicago Board of Trade, corn for delivery in December closed at $3.36-1/4 a bushel, up 5-1/4 cents for the day. Higher crude oil prices and a weaker dollar outweighed the prospect of a huge crop. November soybeans closed at $10.44, up 5-1/2 cents. December wheat was $5.17-3/4, up 5-1/4 cents a bushel.

Farm-gate prices for grain and soybeans have doubled this decade, propelled by a boom in ethanol production. One-third of this year’s corn crop will be used to make fuel ethanol, compared with 11 percent of the 2004 crop.

A 2007 law guarantees ethanol a share of the motor fuel market — 10.5 billion gallons this year and 12 billion gallons in 2010. Two ethanol trade groups said big U.S. corn and soybean crops put into question calculations of a link between U.S. biofuels and greenhouse gas emitted overseas as forest and pasture land is converted to cropland.

“The notion that an acre of corn used for ethanol production in the United States triggers the clearing of an acre of rainforest in Brazil simply doesn’t pass the sniff test,” said Bob Dinneen, head of the Renewable Fuels Association. Ethanol is responsible for more U.S. farm land each year, regardless of corn yields, said Jeremy Martin of the Union of Concerned Scientists, which says indirect land use change should be a factor in U.S. biofuel rules. “The question is not whether we grow corn,” Martin said, but the effect on greenhouse gases of using corn for motor fuel.

The Environmental Protection Agency has proposed regulations that would require biofuels to show an overall reduction in greenhouse gases, including from land that may be converted to crops overseas.

The August crop report is often regarded as the most significant USDA report of the year, reflecting the U.S. position as the world’s largest grower and exporter of corn and soybeans. It is the first forecast of the fall harvest and is based on field surveys and interviews of 28,000 growers.

India will harvest its smallest rice crop in five year due to below-normal monsoons, said USDA. The forecast crop of 84 million tonnes would be down by 15 percent from last year.