Goldman Sachs cut its forecast for soybean prices, citing
better prospects for South American crops, but forecast profits ahead for
investors in the oilseed – and in corn and wheat too.
The downgrade came amid a flurry of reaction to a slew of US
Department of Agriculture data on Friday which have been, broadly, perceived as bullish for prices, and helped futures in corn, soybeans and wheat gain more
than 2% on Monday.
Goldman sliced by $1.25 to $15.50 a bushel its forecast for
soybean prices in three months' time, and by $1.50 to $14.00 its forecast for values
on a six-month timescale.
It viewed as "neutral" USDA revisions on Friday to the
domestic soybean balance sheet figures, which raised the estimate for 2012 production,
citing lower abandonment than had been thought and a greater resilience in
yield to last year's drought, but lifted ideas of domestic consumption too.
'Low levels of stocks'
However, the bank said that the recent improvement in South
American weather - if coming too late to prevent a delayed sowing season and
therefore signalling a slow start to 2012-13 exports from the likes of Brazil –
pointed to a strong end result.
"We expect strong US exports to bring US soybean inventories
to low levels by March 1, supporting soybean prices," Goldman analyst Damien Courvalin
"Beyond that, and barring further deterioration in South
American weather, the large ramp-up in South America exports from April on will
likely bring soybean prices lower."
'Above the forward
It added that it while not changing its forecast for prices
in 12 months' time, of $13.50 a bushel, risks to the estimate were "skewed to the
"Average weather conditions in the US in 2013 would also
bring a large supply response in the US and push prices sharply lower in the
second half of 2013," Mr Courvalin said.
Nonetheless, the bank's forecasts were "still above the
current forward curve" for Chicago futures, which showed soybean prices at
$12.88 a bushel in a year's time.
The May and July 2013 contracts were trading on Monday at a
little under $14 a bushel, also well below the Goldman forecasts for three and
'Prices will need to
The bank kept its forecasts too for corn and wheat futures
above the futures curve.
For corn, Goldman said that - after the USDA on Friday cut
its estimate for domestic stocks at the close of 2012-13, citing unexpectedly
resilient demand from livestock feeders – "prices will need to rally in the
first half of 2013 to achieve the required slowdown in feed use".
For the 2013 crop, "while we see the potential for sharply
lower prices in the second half of the year, we believe that better US weather
will be required for this move to materialise", Mr Courvalin said.
For wheat, Goldman said that USDA estimates for world stocks
were still liable to "modest downward revision" after the forecast for the Argentine
harvest was cut only modestly, to 11.0m tonnes, above estimates from most other
However, the bank also flagged a disappointing pace of US
wheat exports so far in 2012-13, which will require "further improvement soon"
to meet USDA estimates.