Goldman Sachs Group Inc. has slashed its grain price forecasts, citing higher-than expected forecasts for the South American soybean and corn crops from the U.S. Department of Agriculture.

U.S.-based analyst Damien Courvalin in a note published late Monday lowered his three-month forecast for Chicago soybeans to $14 a bushel, down from $15.25/bushel, and for corn to $7.50/bushel, down from $8.25/bushel.

Last week the USDA raised its forecast for Brazil's corn production this year to 72.5 million metric tons, above what analysts had expected and enough to quell concerns that dryness in the U.S. corn belt could create a severe shortage of world supplies. The USDA also raised its forecast for global soybean supplies this year by 1.1% to 60.1 million metric tons, also more than analysts had forecast.

"While we see downside to the USDA's updated Argentina soybean production forecast, this does not derail the large production rebound in the region," Mr. Courvalin wrote to clients.

Still, he kept his 12-month forecasts of $6/bushel for corn and $13/bushel for soybeans--slightly above what the market is currently predicting--citing concerns that dryness across the west of the U.S. corn belt "will limit recovery in U.S. production."

Write to Caroline Henshaw at caroline.henshaw@wsj.com

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(END) Dow Jones Newswires

February 11, 2013 22:00 ET (03:00 GMT)