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Goldman Raises Soybean Outlook on ‘Critically Low’ Inventories

Soybean inventories in the U.S. will reach “critically low” levels by the end of the season, and prices in the next few months will be higher than previously expected, Goldman Sachs Group Inc. said.

Soybean prices may be $14 a bushel in the next three months, analyst Damien Courvalin wrote in a report e-mailed today, raising the outlook from a previous estimate of $12.50 a bushel. Futures for May delivery traded at $14.135 a bushel today on the Chicago Board of Trade. The bank also said it’s closing a bearish recommendation for the May contract with a potential loss of 14 percent.

Soybeans climbed 9.3 percent this year amid rising demand for U.S. exports from China and on concern that output in Brazil, the top exporter, would be smaller than expected. U.S. inventories at the end of the 2013-14 season may be 145 million bushels, the U.S. Department of Agriculture said yesterday, cutting its outlook from 150 million bushels last month. Goldman forecasts supplies at 139 million bushels.

“The U.S. is running out of soybeans,” Courvalin wrote. “The fact that current strong U.S. shipments are occurring despite lower South American than U.S. cash prices, and sharply collapsing Chinese soybean crush margins, introduces a risk that the U.S. over-exports soybeans, bringing domestic inventories to critically low levels.”

The USDA raised its outlook yesterday for U.S. exports by 1.3 percent to 1.53 billion bushels, while Goldman predicts shipments at 1.565 billion bushels. Both forecasts are below total commitments of about 1.62 billion bushels that U.S. exporters have already sold since the marketing year began Sept. 1, meaning China, the world’s biggest consumer, probably will cancel some of its purchases, Courvalin wrote.

Second Half

Prices may “decline strongly” in the second half of the year because of record South American harvests and if weather in the U.S. doesn’t hurt crops this spring and summer, Courvalin wrote. The bank cut its six-month forecast to $10.50 a bushel from $11.50 and raised its 12-month outlook to $10.50 from $9.50. Goldman said U.S. farmers may plant 81 million acres for the 2014-15 season, up from 76.5 million acres a year earlier and larger than the USDA’s forecast 2014-15 forecast of 79.5 million acres.

Corn prices may be $4.50 a bushel in three months, higher than a previous estimate of $4.25 a bushel, Courvalin wrote. Futures for May delivery traded at $4.755 a bushel today in Chicago. The USDA cut its estimate yesterday for domestic inventories by 1.7 percent to 1.456 billion bushels. Supplies still will be 77 percent larger than the prior year, when crops were hurt by drought. Goldman’s estimate for 2013-14 stockpiles is larger than USDA’s at 1.476 billion bushels.

“U.S. and global corn inventories remain elevated,” Courvalin wrote. “In particular, while our ethanol production forecast is above the USDA, we expect lower U.S. feed and residual demand.”

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