May 31, 2012

Credit Suisse expects reduced corn prices on high supply

A "sharp drop" is to be expected for corn prices in light of increasing global supplies in the next year, Credit Suisse Group AG said.

Corn may fall to US$5.50 a bushel in three months and US$5 in 12 months, Credit Suisse analysts led by Tobias Merath said. Farmers in Europe have replanted damaged winter-wheat fields with corn, and yields in the US may increase because this year's rapid planting pace will allow for an earlier harvest, the bank said. July-delivery corn traded at US$5.5675 a bushel on the Chicago Board of Trade.

"Prices would need to fall below US$5 to no longer look expensive," Credit Suisse said. "We think there is a fair likelihood that the market will settle around these levels in one year's time."

Soy may climb to US$14.25 a bushel in three months and US$15 in a year, Credit Suisse said. The oilseed traded at US$13.675 today in Chicago. Demand is stronger for US supplies after dry weather hurt crops in South America, while current prices are too low to curb Chinese consumption, the bank said.

Wheat may trade at US$6.50 a bushel in three months and 12 months, Credit Suisse said. Futures were at US$6.48. While dry weather has threatened crops in Ukraine, Russia and the US, inventories left over from previous harvests "remain sufficient to keep the market well supplied," the bank said.