Goldman Slashes Price Forecasts on Corn, Wheat by 26% on USDA Supply Data

Goldman Sachs Group Inc. (GS) slashed its forecast for corn and wheat prices by 26 percent after the U.S. Department of Agriculture reported higher inventories and increasing acreage. The soybean projection was reduced by 7.1 percent.

Corn and wheat will be $5.90 a bushel in three months, down from estimates of $8, Damien Courvalin and Allison Nathan, New York-based analysts at the investment bank, said today in a report. Yesterday, corn futures in Chicago tumbled the most since November and wheat had the biggest plunge since January 2009 following the USDA report.

“While yesterday’s releases caught the market by surprise and may exacerbate the near-term decline in prices, especially for corn, we believe that above-average weather conditions this summer would be required to sustainably push prices below our new forecasts and offset this spring’s negative impact on acreage, abandonment and yield potential,” the analysts said.

U.S. farmers planted 92.282 million acres of corn this year, 1.8 percent more than projected by analysts in a Bloomberg News survey, and the second-highest since 1944, the agency said yesterday. Stockpiles as of June 1 were 3.67 billion bushels, 12 percent higher than forecast.

USDA Forecasts

Farmers planted 13.627 million acres of spring wheat, 2.6 percent above estimates by analysts, the USDA said yesterday. U.S. inventories as of June 1 totaled 861 million bushels, topping forecasts by 4.6 percent.

Today, corn futures for December delivery tumbled 23.75 cents, or 3.8 percent, to $5.9675 a bushel on the Chicago Board of Trade. Earlier, the price touched $5.755, the lowest for a most-active contract since December.

Wheat futures for September delivery fell 2 cents, or 0.3 percent, to $6.1225 a bushel. Yesterday, the price plunged 8.9 percent.

Soybeans in three months will be $13 a bushel, down from $14, Goldman said.

The oilseed projection “remains above the current forward curve and points to further upside” for a recommendation to buy soybeans for November delivery, Goldman said. “Given our view that soybean prices will outperform corn prices going forward, we would also look for good entry points for a long- soybeans/short-corn spread trade,” the bank said.

Soybean futures for November delivery rose 18.5 cents, or 1.4 percent, to $13.125 a bushel, the biggest gain since June 2.

Corn will be $5.75 in six months and $5.70 in 12 months, down from projections of $7.80 and $7, Goldman said. Wheat will be $6 in six months and $6.20 in 12 months, down from $8.35 for six and 12 months, the bank said.

Soybeans in six months and 12 months will be $13.75, down from $14.75, Goldman said.

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net.

To contact the editor responsible for this story: Patrick McKiernan at pmckiernan@bloomberg.net

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