Morgan Stanley Lowers Agriculture Forecasts on Rising Supply

Morgan Stanley lowered its price forecasts for agricultural commodities including corn and wheat because of rising global supplies.

Corn prices on the Chicago Board of Trade may average $6.60 a bushel in the 2011-12 marketing year, soybeans will average $12.75 a bushel and wheat will average $6.70 a bushel, Morgan Stanley said an e-mailed report today. The bank previously forecast corn at $7.25, soybeans at $14.25 and wheat at $7.50.

“We are lowering our price forecasts across the agricultural commodities, accounting for higher global supply,” Morgan Stanley analysts led by Hussein Allidina in New York wrote in the report. “We still see upside to prices, as the recent sell-off, particularly in corn and soybeans, is overdone in the face of still-tight U.S. stocks and strong U.S. feed and ethanol demand.”

Corn futures are down 5.1 percent this year at $5.97 and soybeans have dropped 20 percent to $11.155 in Chicago. Wheat has declined 24 percent to $6.005 on the Chicago Board of Trade. The drop in prices this year “presents a buying opportunity,” according to the bank.

World wheat stockpiles will total 208.5 million metric tons, up 2.9 percent from a November estimate, according to the U.S. Department of Agriculture. The USDA raised its estimate for corn inventories by 4.6 percent to 127.2 million tons and its soybean stockpiles forecast by 1.5 percent to 64.5 million tons.

Grains lagged other commodities this year “as the market digests expectations of better-than-expected global supply,” Morgan Stanley said. “The negative impact of this supply on U.S. exports has sidelined concerns over poor U.S. production, diverting the focus from still-tight U.S. balances.”

Corn in the 2012-13 marketing year will average $5.75, down from a prior forecast of $6, the bank estimates. Soybeans will average $12.70, down from $13.50, and wheat will average $6.30, down from the prior forecast of $7, Morgan Stanley said.

To contact the reporter on this story: Tony C. Dreibus in London at tdreibus@bloomberg.net.

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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