Field observations have backed the expectations of a strong US corn crop, which have prompted Goldman Sachs to lift its yield estimates and cut its price forecasts for the second time in less than two months.
Scouts on Midwest crop tour run by MDA Weather Services followed up findings that Indiana corn was on for a recovery to an average yield of 164.2 bushels per acre, a result in line with expectations, with an estimate of 208.4 bushels per acre for Illinois.
"That compares to 136.2 bushels per acre in the same counties last year," MDA said, terming the result "better than expected, especially in some areas where rainfall has been lacking in recent weeks".
While last year yield was lost after the tour thanks to drought, with the Illinois crop actually coming in at 105 bushels per acre according to US Department of Agriculture data, "given the favourable forecast for the next few weeks, there does not appear to be nearly as large of a downside risk this year", MDA added.
The MDA team is now heading into Iowa, the top corn and soybean producing state, where scouts on a tour run by consultancy Lanworth reported an average yield of 199.6 bushels per acre from fields they examined, within a range of 162-232 bushels per acre.
Last year, the Iowa corn yield came in at a drought-reduced 137 bushels per acre, on USDA data.
The results tie in with rising market expectations for the overall US corn yield, with the market pricing in a figure of 159-161 bushels per acre, on estimates from US Commodities, ahead of the current USDA forecast of 156.5 bushels per acre.
However, a series of brokers have lifted yield forecasts in the last two weeks, including Doane, which on Friday pegged the yield at 161.2 bushels per acre.
Goldman Sachs late on Tuesday lifted its estimate by 5 bushels per acre to 161 bushels per acre.
"US weather has remained volatile but turned favourably cool and wet during the key corn pollination window," Goldman said.
"Given these production revisions and our mostly unchanged demand forecasts, we now forecast a larger recovery in US corn inventories than both previously and the USDA."
The bank, pegging US corn stocks at the close of 2013-14 at 2.187bn bushels, ahead of the USDA forecast of 1.959bn bushels, cut its forecast for Chicago corn futures by $0.50 a bushel to $4.25 a bushel on three-, six- and 12-month horizons.
These forecasts are significantly below the levels investors have currently plugged into Chicago futures, with the September 2014 contract trading at $4.93 a bushel on Wednesday.
'Greater downside for soybeans'
Goldman also cut its forecast for Chicago soybean futures by $0.50 a bushel to $10.50 a bushel on three-, six- and 12-month horizons - levels more than $1 a bushel below the futures curve.
The downgrade reflected ideas, suggested by inventory forecasts, that the soybean: corn price ratio, currently close to 2.6: 1, will fall to 2.45: 1.
"As a result, we continue to forecast greater downside to soybean prices," the bank said.
While corn prices may prove range-bound for now, "we see greater downside potential for new-crop soybean and soymeal prices as prices currently embed a high weather premium ahead of the key yield-setting period".