September 12, 2011

Analyst sees rise in US soy prices

The potential for large ethanol demand may sharply jack up soy prices in 2012, Goldman Sachs said on Friday (September 9).

The firm said that over the next 12 months, soy prices will increase due to the growing risk of acreage losses in 2012.

Soy competes for acreage with corn in the US Midwest. Corn prices rose to an all-time high of nearly US$8 per bushel in June and have significantly outperformed soy so far this year.

Goldman said it was lowering its US corn yield forecast to 148.5 bushels an acre, well below USDA's August estimate of 153.0 bushels as weather conditions in the US "continued to disappoint throughout August.

While current corn prices are already achieving demand destruction, our lower production forecast points to upside risk to our corn price forecast as well, Goldman said.

However, the investment firm believes the upside is likely capped near US$8.00 a bushel by the potential for large ethanol demand destruction in the US.