Fears over waning Chinese demand, which have rocked commodity markets, may be misplaced, Goldman Sachs has said, forecasting rises in the prices of corn and - eventually - soybeans.

The measures, such as raising bank reserve requirements and lifting some interest rates, that China has implemented to control its tearaway economy "are not sufficient", the investment bank said.

This limited response, by "tilting the economic risks in China towards inflation and stronger-than-expected economic growth", meant that the risks for investors were of "too much commodity demand rather than too little".

The bank, noting that China's demand for oil was growing at more than twice the pace analysts had forecast, said the sell-off in commodities was a "buying opportunity", flagging in particular corn, copper and oil.

'Compelling opportunity'

For corn, a slump in Chicago prices – currently of 17%- since the US Department of Agriculture raised crop estimates last month was providing an "increasingly attractive entry points to establish new longs", Goldman said.

While the risk of a jump in US plantings this year represented some threat to prices, the base case for yields, assuming average weather, was 156 bushels per acre, well below consensus forecasts.

The ratio of global stocks to consumption – a key measure of market tightness, and therefore price potential – was set to fall in both 2009-10 and 2010-11.

Meanwhile, high oil prices, coupled with US biofuel mandates, would stimulate growth in demand by ethanol plants.

"We remain constructive on corn prices from current levels," the bank said, saying they offered corn consumers a "compelling opportunity" to buy in and protect themselves from a market rebound.

Shock potential

For soybeans, the bank warned that near-term prospects were poor thanks to a prospective jump of one-third in South American production this season.

"The picture at the world level is much less supportive," Goldman said.

The bank, flagging a shift in market focus from low US soybeans stocks at the end of 2009-10 to South America's "expected strong supply rebound" slashed its price forecast for the oilseed in a year's time by $1.50 a bushel to $9.50 a bushel.

However, this weakness represented an opportunity for buyers to "position for future strength", potentially sparked by crop shocks, such as the drought which slashed Argentine production last year.

"Over the medium-to-long term, soybean offers the most compelling drivers, as expected strong demand growth from emerging economies will likely leave the market particularly sensitive to negative supply shocks," the bank said.