July 3, 2012

US corn, wheat, soy forecasts up in the next 12 months

US wheat, corn and soy forecasts for the next three, six and 12 months revise up on tighter inventories and current anticipated hot, dry weather conditions in the Midwest of US, Goldman Sachs said on Monday (July 2).

But should weather conditions deteriorate further than already forecasted, the bank said its forecasts would come under price risk. This is especially the case for corn as it completes its key pollination phase, Goldman added.

The US bank raised its wheat forecast to US$7.15 a bushel from US$5.75/bushel previously on the back of lower inventories and growing downside risks of lower production due to hot and dry weather in key producing regions such as Russia, Ukraine, China, India and Australia. This will keep wheat prices trading at a sustainable premium to corn prices, the bank said.

Similarly it raised its corn forecast to US$6.25/bushel from US$5.25 a bushel previously and lowered its 2012-13 US corn ending stock forecast, but said it stills expect a modest build in US corn inventories in 2012-13.

"Importantly, while the upside to corn prices remained capped in 2011-12 by the large US and global wheat supplies, this is no longer the case as disappointing 2012-13 wheat production will likely limit corn-to-wheat substitution for both feed and exports going forward," the bank said.

It upped its soy forecast to US$15.50/bushel from US$14.30/bushel, citing a market deficit and a surplus US corn balance which will lead the market to outperform corn.