Argentina’s corn and soybean crops have suffered irreversible damage from hot, dry weather, curbing the country’s harvest prospects and likely adding fuel to a grain market rally that’s pushed prices to multi-year highs, Rabobank Group analysts said.

While rainfall this week brought some relief to dry areas, Argentina’s crops are still expected to fall short of expectations, Rabobank analysts led by Luke Chandler said in a report today. Smaller harvests in Argentina, the world’s second-biggest corn exporter behind the U.S., “places increased pressure on already-tight global supplies,” Rabobank said in the report.

The Rabobank analysts cut their forecast for Argentina’s corn crop to 20 million metric tons, down 11 percent from a previous estimate of 22.5 million metric tons. Last year, Argentina harvested 22.8 million metric tons, according to the U.S. Department of Agriculture.

The analysts also lowered their outlook for Argentina’s soybean crop, estimating the harvest at 48 million metric tons, down 7.7 percent from a previous forecast. Argentina harvested 50.5 million metric tons in 2010.

“Recent rains have lowered the risk of extreme downside to our soybean forecast,” Rabobank analysts said. But “irreversible” damage to Argentina’s corn crop will have a bigger impact on prices “due to our view that the global corn balance sheet is more precariously balanced than soybeans,” Rabobank said.

Smaller production in Argentina signals U.S. livestock feeders will face even greater competition from the global export market for domestic corn supplies. Beef and pork producers have already watched feed costs skyrocket as corn rallied above $6 a bushel to the highest levels since mid-2008.

Corn futures in Chicago are up about 55 percent over the past 12 months, reaching a 30-month high at $6.67 a bushel Jan. 21, and some traders and analysts expect prices to surpass $7 in coming months.

Rabobank expects corn prices to outpace soybeans amid an intensifying “battle for acres,” this spring, meaning farmers will have more financial incentive to plant corn.

With global corn supplies tighter than soybeans, “we expect the recent trend in CBOT soybean and corn futures prices to continue as corn has a stronger need to ‘buy’ U.S. acreage,” Rabobank said. “We maintain our bullish view on both commodities… as the underlying fundamentals continue to remain extremely tight, and see any short-term pullback as a buying opportunity.”

At today’s close, March corn futures fell 6 ¾ cents to $6.44 a bushel, down 2 percent on the week. March soybean futures fell 1 ½ cents to $13.98 a bushel.