Goldman Sachs is Bearish Wheat
Goldman Sachs (GS) Monday said increases in grains futures from ongoing Ukraine tensions would be limited for the year ahead.
The U.S. investment bank also said it is unlikely that sanctions would be imposed on Russian grain exports despite escalating tensions in its neighbor, "given the humanitarian dimension and that the vast majority of Russian agriculture exports are sent to developing nations," it said.
The U.S. Department of Agriculture expects Ukraine to be the world's fifth-biggest exporter of wheat by volume and the third-largest shipper of corn this year. The country sells much of its grain to Egypt, the world's largest importer of wheat, and to other Middle Eastern countries and Africa.
Goldman Sachs forecasts Chicago wheat futures will fall to $5.75 a bushel on a 12-month basis and to $6.10 a bushel on a 3-month basis, compared with its month-earlier forecast of $6.25 a bushel.
The weather phenomenon El Nino is unlikely to dent global wheat supply significantly. Previous serious weather events related to El Nino have affected agricultural output, Goldman Sachs said.
The bank said "given decent production prospects for the European and Black Sea [wheat] crops, normalization in U.S. precipitation or limited El Nino impact would push wheat prices lower as global inventories remain comfortable," the bank said.
The bank left untouched its forecast for corn futures to average $4.00 a bushel on a 12-month basis.
"Cold and wet conditions in May create upside risk to our price forecast on lower U.S. acreage while the potential for the El Nino weather pattern this summer creates upside risk to our yield and downside risk to our price forecast," the bank said.
Chicago soybeans futures are forecast to hit $10.50 a bushel on a 12-month basis since "yields are usually favorably impacted by a summer El Nino as conditions are typically cooler and wetter than normal."
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(END) Dow Jones Newswires
April 14, 2014 09:04 ET (13:04 GMT)