by Agrimoney.com
Corn and soybean futures offer among the most lucrative opportunities among commodities – for investors betting on falling prices, Goldman Sachs said, amid a rash of broker activity following a key US report.
The broker slashed by up to $1.75 a bushel its forecast for Chicago corn futures, and by up to $2.50 a bushel its estimates for soybean prices, citing the increasing confidence in a recovery in world inventories.
"It will require a significant weather shock to limit the rebuild in corn and soybean inventories given the record large realised South American harvests and current weak global consumption," the bank said.
Indeed, it cautioned that further downgrades to its forecasts may yet be forthcoming, to $4.25 a bushel for corn and $10.00 a bushel for soybeans, should its most likely scenario - of a 13.6bn-bushel corn harvest and 3.37bn-bushel soybean crop – materialise.
'The largest opportunity'
Indeed, Goldman said it viewed "the downside potential to agriculture prices as the largest opportunity across the commodity markets we cover", recommending investors to take out short positions in both corn and soybean futures.
"While we may be too early in entering this trade, we prefer that to being late given our belief that current prices embed a large weather premium and that prices could decline in the next six weeks," the bank said.
"While US corn and soybean production levels remain uncertain, we still expect that production will recover relative to last year's level under most weather outcomes."
Deutsche outlook
The downgrades came amid a rash of broker comment after the US Department of Agriculture on Wednesday cut its forecast for the US corn crop by 135m bushels to 14.0bn bushels, far less than analysts had expected.
The estimates sent new crop corn futures tumbling more than 2% on Wednesday, with the contract shedding a further 0.7% on Thursday in late deals, although the reliability of the USDA estimates was clouded by officials' failure to cut their forecast for corn acres, despite rain delays to sowings.
Deutsche Bank said that Wednesday's forecasts had, in theory, set the scene for corn prices in "the $3.60-a-bushel range", a level not seen in Chicago since July 2010, although it acknowledged the prospect of crop downgrades ahead, after a late-June planting survey gives the USDA a better handle on sowings.
The bank – forecasting US corn sowings at 94.8m acres, 2.4m acres below the USDA figure, and with the yield at 153.7 bushels per acre, below the official forecast of 156.5 bushels per acre – restated an expectation of new crop prices fall to $4.30 a bushel.
The bank was also downbeat on prospects for soybean prices, foreseeing them falling below $11 a bushel, a level falling through only briefly since 2010.
'Bearish on new crop corn'
Separately, Rabobank also voiced doubts over the degree to which Wednesday's USDA data should be relied upon, given the prospect of a corn acreage revision after the end of June plantings report.
"The June Wasde numbers will be perceived by the market as bearish, although possibly only for a brief time, with a truer reflection of production potential to be released by the June 28 Planted Acreage report," the bank said.
However, it echoed Deutsche and Goldman in saying it remained "bearish on new crop corn relative to the futures curve".
Separately, Goldman Sachs equity analysts warned that with weather variations likely to have a large say in agricultural commodity prices over the next months, "we expect the near-term trading path for fertilizer equities to remain volatile as the summer progresses".
The broker restated buy ratings on Mosaic and PotashCorp "as we prefer exposure to international potash markets and company-specific capital allocation catalysts".
No comments:
Post a Comment