Corn prices are poised to rally above the two-year highs reached last month if the USDA cuts estimates for the 2010 harvest again as expected, analysts say.

The nation’s farmers will harvest an estimated 12.95 billion bushels of corn this year, based on a Dow Jones Newswires survey of analysts before the USDA’s next monthly Crop Production report, scheduled to be released at 7:30 a.m. Central time Friday. That’s down 1.6 percent from the 13.16 billion-bushel crop the USDA projected in September.

Analysts dialed down expectations for this year’s harvest after heavy rains hurt crops in parts of the Midwest and early harvest results produced disappointing yields. In August, the USDA estimated the crop at 13.37 billion bushels, which would have been an all-time high.

“It’s corn that stands out as the crop of disappointment for 2010,” Dan Basse, president of AgResource Co., said in an Oct. 6 report. He estimated the crop at 12.67 billion bushels.

Deteriorating harvest prospects fueled a late-summer rally in Chicago Board of Trade corn futures, signaling higher feed costs for beef and pork producers over the coming year.

On September 27, December corn reached $5.28 ¾ a bushel, the highest price for a closest-to-expiration contract since September 2008. Near today’s close, December corn rose 9 ½ cents to $4.98 a bushel, up 33 percent since the end of June.

“Corn yields are not good,” said Jack Scoville, a vice president and analyst with Price Futures group, Inc., in Chicago. He expects corn futures to climb to $5.50 to $5.75 a bushel if the USDA trims the crop below 13 billion bushels.

Based on the Dow Jones survey, analysts expect the USDA will cut its estimate for average U.S. corn yields to 159.9 bushels an acre from 162.5 bushel in a September report. Last year, farmers harvested 13.11 billion bushels of corn at an average yield of 164.7 bushels an acre, both records.

“We expect USDA to make larger cuts to state yields,” particularly in Illinois and Indiana, said Marty Foreman, an analyst with Doane Advisory Services. “Yield estimates may come down in the western Corn Belt, but more modestly.”

Foreman projected average yields at 159.1 bushels an acre and production at 12.89 billion bushels. That “isn’t too far off trade estimates, but would probably be enough for prices to challenge the September high,” Foreman said.

A crop closer to 12.8 billion to 12.85 billion bushels “is probably needed to move prices decisively above” the late-September highs, he said. The USDA’s larger-than-expected grain stocks estimate last month “adds some cushion to supply that wasn’t apparent when prices were making the high,” he said.

Nationwide corn supplies as of Sept. 1 totaled 1.708 billion bushels, up 2.1 percent from a year earlier, the USDA said in a Sept. 30 report. Stocks were about 300 million bushels, or 21 percent, above the average analyst projection.