Goldman Sachs lowers soy, corn, wheat price forecasts

Mon Nov 12, 2012 12:18pm EST

* Cuts 3-mth soy price f'cast to $16.50/bu, from $18.75

* Lowers 3-month forecast for corn to $8.25, from $9.00

* Cuts 3-month wheat forecast to $9.50, from $10.25

CHICAGO, Nov 12 (Reuters) - Investment bank Goldman Sachs lowered its price forecasts for soybeans, corn and wheat after the U.S. Department of Agriculture raised its estimate of the U.S. 2012/13 soybean harvest above trade expectations.

The firm said in a research note issued to clients on Friday that it dropped its three-month price forecast for Chicago Board of Trade soybeans to $16.50 per bushel, from $18.75 previously, and its six-month forecast to $15.50 per bushel, from $17.25.

For CBOT corn , Goldman lowered its three-month price forecast to $8.25 per bushel, from $9.00 previously. Goldman cut its three-month price forecast for CBOT wheat to $9.50 per bushel, from $10.25 previously.

Following the release on Friday of USDA's monthly supply/demand reports, Goldman said, "The main surprise came from the large increase in U.S. soybean yields, to a level above the high end of consensus expectations."

The government data, Goldman said, "confirmed that U.S. and global corn and wheat inventories remain very low, that the U.S. and global soybean markets remain in deficit but that risks of critically tight soybean inventories continue to fade quickly."

In its note, Goldman predicted that the combination of low U.S. and global grain inventories, downside risks to crop production and signs of resilient demand would lift grain and oilseed prices above current values.

However, Goldman said it lowered its outlook for grain prices "following the recent downward revision to our oil price forecasts."

At the CBOT as of 11 a.m. CST (1700 GMT), December corn was down 22-3/4 cents at $7.16 a bushel, while December wheat was down 25-1/2 cents at $8.61 and benchmark January soybeans were down 44-1/4 cents at $14.07.

Goldman said it expected USDA's final report on the U.S. 2012 crops in January to raise the abandonment rate for corn acreage.

Goldman also noted uncertainty about the pace of consumption and the distribution of export origination, all which could lead to widely varying prices in the first half of 2013.

"We believe that this level of uncertainty is currently mispriced by the options market, with implied volatility for CBOT corn, wheat and soybean prices near multi-year low levels," Goldman said.

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