Morgan Stanley said Wednesday that corn prices will likely come under pressure in the second half of next year, as rebounding production from South America and the U.S. increases supply.

Analysts at the bank said they expect tight corn fundamentals through the beginning of 2012 as larger livestock herds suggest higher U.S. feed demand than is currently being projected by the U.S. Department of Agriculture.

However, they added that high prices are already eliciting production responses from Argentina, Brazil and the Ukraine, which has reduced the call on U.S. exports and is likely to curtail the country's production in 2012-13.

Morgan Stanley said cheap wheat from the Black Sea, European Union and Argentina will likely continue to edge out U.S. exports, leaving upside to domestic feed demand as the only potential positive catalyst into the first quarter of 2012.

The bank's analysts noted a global supply response, brought on by high prices in 2010-11 and normalized weather in the former Soviet Union countries, has shifted the wheat market from a production deficit to surplus.

-By Michael Haddon, Dow Jones Newswires; 4420-7842-9289; michael.haddon@dowjones.com

(END) Dow Jones Newswires

November 30, 2011 04:49 ET (09:49 GMT)