Goldman sees corn to soybeans extending losses on U.S. supply
By Bloomberg
Corn and soybeans will extend this year's price slump as U.S. yields beat government estimates, boosting stockpiles in the world's biggest grower, according to Goldman Sachs Group Inc.
The bank forecasts corn at $3 a bushel in three months and six months, Damien Courvalin, a New York-based analyst, wrote in a report dated yesterday. That's 6 percent below today's prices and would be the lowest since October 2006. Soybeans may drop to $8 a bushel on a three-month and six-month basis, it said, a decline of 12 percent. The bank cut estimates for both crops, it said, without providing previous predictions.
Two years after the worst U.S. drought in decades drove corn and soybean prices to a record, futures have slumped as beneficial rain and mild weather boosted the outlook for yields. U.S. farmers will harvest unprecedented corn and soybean crops and global wheat output will climb to the highest ever, according to the U.S. Department of Agriculture. Rising supplies are helping cut global food prices, with a United Nations' index slumping to an almost four-year low in August.
"Following favorable weather conditions in the U.S. and Northern Hemisphere this summer and in South America last winter, U.S. and global corn and soybean inventories are either at record highs or at their highest levels since 2005," the report said. "We believe that 12-month prices need to price below marginal production costs to rebalance inventories in 2015-16 in the face of still constrained demand growth."
Yield Outlook
Corn futures fell 0.5 percent to $3.1925 a bushel on the Chicago Board of Trade by 11:38 a.m. in Singapore today after touching $3.1875, the lowest since September 2009. Soybeans lost 0.6 percent to $9.0825 a bushel after dropping to $9.055 on Sept. 29, the lowest since July 2010.
Goldman predicts U.S. corn yields at 175 bushels per acre in 2014-2015 compared with 171.7 bushels forecast by the USDA on Sept. 11. That will boost output to 14.552 billion bushels, up from the agency's estimate of a 14.395 billion, it said.
Prices may rebound to $3.75 a bushel on a 12-month basis on speculation large U.S. and global corn inventories and limited demand growth may cut 2015-2016 U.S. and South American production, Goldman said. Corn may rally toward $4 over a 12- month period as the U.S. curbs planting, UBS AG said in a Sept. 26 report.
U.S. soybean yields will be 47.5 bushels per acre and output will total 3.969 billion bushels, topping the USDA's estimate for yields of 46.6 bushels an acre and a record crop of 3.913 billion bushels, according to Goldman.
Wheat prices were forecast by Goldman at $4.50 a bushel in three months and six months. The contract for December delivery dropped 0.7 percent to $4.745 a bushel today. World production will reach a record 719.95 million metric tons this year, the USDA predicts.