January 6, 2011

Goldman Sachs says soy a better investment than wheat

Soy is a smarter investment than wheat due to its greater potential demand growth and limited supply base, Jeffrey Currie, Global Head of Commodities for Goldman Sachs said Wednesday (Jan 5).

Currie said soy production was dominated by four countries: the US, China, Argentina and Brazil, while wheat could be grown in many countries.

He also noted soy demand was centred in regions where economic growth was relatively strong including both Latin America and large parts of Asia while Europe, the Middle East and Africa were the "wheat-based societies."

"If you look at where the demand (growth) is going to be, it is going to be in soybeans. What is hard to produce? Soybeans. Wheat, I don't really care for it as an investment," Currie said.

Soy prices on the CBOT rose to their highest level in more than two years earlier this week, supported by concern that dry weather in South America may curtail production.

CBOT wheat prices have risen to a five-month peak this week with the rise driven partly by floods in Australia, which have hampered the movement of grain to export terminals.