February 3, 2012

Goldman raises forecast on South American corn, soy, wheat

Goldman Sachs Group Inc. (GS) increased its three and six-month corn projections from US$6.30 to US$6.90 a bushel, because of lower production from South America.

The three- and 12-month soy price rise to US$12.90 a bushel from US$12.15 a bushel, Damien Courvalin, an analyst at the bank in New York, said in a report. A soy shortage is forecast for 2012-13, he wrote. The wheat forecast was increased to US$6.80 a bushel from US$6.20 a bushel, to keep up with the corn changes, according to the report.

"Relative to the current forward curves, we remain most constructive on corn prices in the near term (three months) and most constructive on soy prices over the medium term (12 months). We remain bearish wheat prices over the medium term." For now, corn will have to climb to encourage more planting to rebuild US inventories, Goldman said.

Investor selling of farm commodities in late 2011 left grains traded in Chicago "well below the levels suggested by current fundamentals,'' Courvalin said. "We believe this shift is premature as the 2012-13 crop has yet to be planted and is excessive in light of our 2012-13 US stocks-to-use forecasts.''