Macquarie Group Ltd. said it’s bearish on grains and oilseeds for the next 12 months as farmers globally boost output, while prices are likely to rally in coming years.
World corn production may climb to a record 925.95 million metric tons in the 2012-13 marketing year, as yields and acres rise, analyst Chris Gadd said today in an e-mailed report. That’s below the U.S. Department of Agriculture’s projection of 945.78 million tons. Macquarie, which also expects lower world corn consumption than the USDA, forecast inventories of 152.34 million tons by the end of the crop year, in line with U.S. government estimates.
Corn prices may be $5.87 a bushel in 2012 and $4.65 in 2013, before rebounding to $6.72 by 2017, Gadd wrote. The grain for July delivery traded at $5.6475 a bushel on the Chicago Board of Trade, by 12:39 p.m. London time.
“Bearishness in the 12/13 season comes purely because we expect the increase in supply to substantially outweigh stronger demand,” London-based Gadd said. “In the following seasons, price rallies will be likely, and necessary, as we see prices falling below the marginal cost of production for the core agricultural commodities.”
Population growth and rising meat consumption in emerging markets will support grain demand long term, Gadd wrote. Infrastructure issues in Brazil and production inefficiencies in former Soviet Union countries may limit the world’s ability to expand fast enough to meet demand, according to the report.
Wheat prices may average $6.16 a bushel in 2012 and $5.56 in 2013, Gadd wrote. Soybeans may be $13.68 a bushel this year and $12 next year, before rebounding to $13.44 in 2017, he said. July-delivery wheat traded at $6.5175 a bushel in Chicago today, while soybeans for the same delivery month were at $13.75.