Wheat prices have further to fall even after this week's 6% correction, Goldman Sachs has said, warning that the grain's "soft fundamentals" will continue into 2010-11.

The investment bank has stood by a forecast of Chicago wheat hitting $5.00 a bushel in three months time, nearly 10% below the level futures prices are factoring in.

The wheat market will remain "amply supplied" in 2009-10 thanks to two years of robust global harvests.

Meanwhile, demand was "lacklustre", Goldman said in a report, noting "no biofuel exposure, no growth in global wheat food demand, and very little leverage to emerging economies".

"Wheat price risk is skewed to the downside, even post the recent sharp decline", the note said.

Rising stocks

These weak fundamentals were "likely to persist" in 2010-11, the bank said, forecasting that the global harvest would for a third successive year exceed production despite a drop of 2.4m hectares in plantings.

This would lower the stocks-to-use ratio – a key measure of market tightness, and therefore an important indication of prices – to 39.7% from a heady 48.6% this season.

However, the fall in US inventories would not be enough to prevent global stock rising by 14.5m tonnes to 202.8m tonnes.