Goldman Sachs hiked its short-term forecast for soybean prices, and
nudged higher expectations for corn and wheat prices, reflecting the impact of
higher-than-expected exports in eroding US supplies.
"The US is running out of soybeans," the investment bank
said, highlighting China's reluctance, so far, to cancel import orders from the
US, as had been expected with a strong Brazilian harvest now in progress, and
prices there cheaper.
"Shipments and export sales to China remain elevated despite
a record large start to Brazil's soybean exports in February, and against our
prior expectation for a slowdown," Goldman analyst Damien Courvalin said.
"The window for these [Chinese import order cancellations]
to occur is shrinking quickly, given the continued strong pace of shipments in
"The fact that current strong US shipments are occurring
despite lower South American than US cash prices, and sharply collapsing
Chinese soybean crush margins, introduces a risk that the US over-exports
soybeans, bringing domestic inventories to critically low levels."
Year of two halves
The bank forecast US soybean inventories ending 2013-14 at
139m bushels - 6m bushels below a forecast issued by the US Department of
Agriculture on Monday, itself a downgrade of 5m bushels.
Goldman Sachs soybean price forecasts and (change on previous)
Three month horizon: $14.00 a bushel, (+$1.50 a bushel)
Six month horizon: $10.50 a bushel (-$1.00 a bushel)
12 month horizon: $10.50 a bushel (+$1.00 a bushel)
The estimate, which reflects ideas of US soybean exports
hitting 1.565bn bushels, more than the USDA foresees, would leave stocks, as a
proportion of use, at a historically low 4.2%, implying buyers will need to compete
heavily for supplies and raise offers.
However, even upgraded by $1.50 to $14.00 a bushel on a
three-month timescale, and by $1.00 to $10.50 a bushel in a year's time, the
bank's forecasts for Chicago soybean futures prices remain below the levels the
market is expecting.
The bank highlighted the potential for "record high" US
soybean imports from Brazil this summer, more than the USDA is counting on,
plus flagged the threat of porcine epidemic diahorrea virus (PEDv) to domestic
demand, in stemming growth in the hog herd.
Further ahead, it cautioned that the "very strong Chinese
soybean restocking" currently underway may be followed by slower purchases in
2014-15, when the US will face early-season competition from Brazilian soybeans
left over from their record current harvest.
"We continue to expect that soybean prices will decline
strongly in the second half of 2014," Mr Courvalin said.
Corn, wheat upgrades
For corn, Goldman raised its forecast for prices in the
three-month horizon by $0.25 a bushel to $4.50 a bushel, prompting a "mechanical"
upgrade to the estimate for Chicago wheat futures of $0.40 a bushel to $5.85 a
Goldman Sachs corn price forecasts and (change on previous)
Three month horizon: $4.50 a bushel, (+$0.25 a bushel)
Six month horizon: $4.00 a bushel (-$0.25 a bushel)
12 month horizon: $4.00 a bushel (unchanged)
Prices of corn and wheat, as rivals for uses such as feed,
typically show a good correlation.
Again, the bank cited better-than-expected exports in corn -
plus a forecast of a "strong ramp up" in ethanol production next month as low
inventories of the biofuel and healthy export demand underpin margins.
However, with the prospect of a strong harvest this year, pencilled
in at 13.988bn bushels, a fraction above the USDA expectation, Goldman remained
cautious over corn prices for next season.
"Our yield model based on trend yield growth and summer
weather suggests that the US corn yield should reach 165 bushels an acre under
average conditions this summer, bringing corn prices below $4.00 a bushel," Mr