Societe Generale forecasts a recovery in corn futures, but
ditched a recommendation to buy soybeans, as the debate continued over the prospects
for row crop prices following surprise US data.
The bank joined the likes of Commerzbank and Rabobank in
slashing its expectations for corn and soybean futures, following a series of
negative data from the US Department of Agriculture signalling that prospects
for domestic supplies of both crops are stronger than the market had thought.
However, the downgrades for corn left significant scope for
a price revival with SocGen forecasting prices averaging $4.44 a bushel this
quarter, and $4.38 a bushel in the last three months of 2014, well above levels
that investors are factoring in.
For soybeans, however, the revised estimates of $10.95 a
bushel for the July-to-September period, and $11.17 a bushel are close to the
Indeed, SocGen acknowledged that it was portraying for soybeans
"a far more bearish outlook" than the USDA, forecasting US inventories closing
2014-15 at 464m bushels, 51m bushels above the official forecast.
The bank's estimate reflects lower expectations for the
domestic consumption, besides a higher estimate for inventories carried over
from the current season.
"We see US crushings falling year on year," SocGen analyst
Christopher Narayanan said, highlighting competition from South American
"As more South American beans are crushed and exported, this
should ease US soymeal exports."
For soybeans themselves, "while lower prices could help aid
demand, the record South American harvest will keep the global trade highly
competitive", the bank said, ditching a recommendation to buy November soybeans.
For corn, however, SocGen was more upbeat on consumption
prospects, forecasting US use of the grain for making ethanol, feeding
livestock and in exports above USDA expectations.
"Lower prices will continue to encourage buyers, eventually
raising prices, though not likely to the levels we initially expected," Mr Narayanan
The estimates left SocGen's estimate for US corn stocks at
the close of 2014-15, of 1.56bn bushels, well below the USDA forecast of 1.80bn
bushels – even though the bank forecast a bigger harvest.
SocGen raised to 167.0 bushels per acre its forecast for the
US corn yield, above its previous estimate of 163.3 bushels per acre, and the
USDA projection of 165.3 bushels per acre.
"Benign weather has aided crop development and the current
July-September forecast from the National Oceanic and Atmospheric Administration
(NOAA) suggests normal temperatures for much of the US Midwest, with above-average
rain in the western Corn Belt," he said.
'More work on the
The forecasts are the latest in a series in prospects for
corn and soybean prices, and come amid a debate on when the historically high
ratio of November soybean futures to December corn futures, of some 2.8:1,
might return closer to typical levels.
Analysis by Moore Research of historic pricing patterns
suggests a trend of November soybeans eroding their premium between mid-July
and mid-August, when corn futures tend to stabilise.
At Chicago broker RJ O'Brien, Richard Feltes said: "Soybeans
have more work on the downside than corn.
"Soybeans continue to carry weather risk premium that will
erode if [weather forecasters] are on target about a cool August with near