Corn and soybean prices have scope for gains, boosted by worsening US crop conditions, although the potential for headway is limited by export softness, Goldman Sachs said.
The investment bank restated a forecast for Chicago corn futures reaching $6.50 a bushel for September, nearly $0.40 a bushel above levels investors currently foresee.
For March, prices will rise further, to $6.85 a bushel, more than $0.60 a bushel above the level that the Chicago March lot was trading at on Tuesday.
Goldman forecast soybean prices at $14.95 a bushel for September, more than $1 above the futures curve, with an expectation for a further increase in futures to $15.50 a bushel as of March, more than $1.50 above the level of March futures.
‘Continued to stress crops’
The forecasts reflected concerns of crop damage from recent hot and dry weather, which has seen the official rating of the US corn crop fall by 4 points over the past two weeks to 56%, in terms of the proportion assessed as “good” or “excellent”.
In Iowa, the top corn-growing state, the proportion of crop viewed as good or excellent is down by 10 points over the two weeks, although to a still-solid 66%.
“Dry conditions continued to stress crops and pastures,” US Department of Agriculture officials in Iowa said in a briefing released overnight.
For soybeans, the US rating eased by 2 points over the two weeks, to 58%, although again factoring in a 10-point slide in the Iowa figure, to 63% good or excellent.
Goldman said: “After a brief respite in late July, weather across the US corn growing region turned hotter and drier in August, shifting peak yield risk from corn into soybeans.
“With a 2-3% drop in yields enough to push expected corn and soy stocks-use ratios to all-time lows, grain balances are entering their final period of supply volatility for the coming marketing year.”
The bank added that it was “increasingly constructive on the grains complex on the back of hotter weather”, which was “starting to affect expectations for next year’s carryout” inventories for US corn and soybeans.
Nonetheless, it added that the upside for grain prices was “capped by continued weakness in the export outlook”, with US corn exports on track to finish August, the last month of 2021-22, “350m bushels below last year”.
As of August 4, US corn exports, at 57.12m tonnes for the season, were down 7.47m tonnes year on year.
Cumulative exports of soybeans, for which the US 2021-22 marketing year also ends this month, stood down 4.65m tonnes at 54.79m tonnes.
Both declines reflected in particular a slide in orders by China – which the USDA believes, for soybeans at least, may be about to improve.