Soybean prices could rally sharply over the next year but corn should be capped by the potential for large ethanol demand destruction in the U.S., Goldman Sachs said in a report received Sept. 9.
For soybeans, we see an increasing likelihood that prices will rally sharply over the next 12 months given the growing risk of acreage losses in 2012, the investment bank said.
Soybeans compete for acreage with corn in the U.S. Midwest.
Corn prices rose to an all-time high of nearly $8 per bushel in June and have significantly outperformed soybeans so far this year.
Goldman said it was lowering its U.S. corn yield forecast to 148.5 bushels an acre, well below USDA s August estimate of 153.0 bushels as weather conditions in the U.S. continued to disappoint throughout August.
While current corn prices are already achieving demand destruction, our lower production forecast points to upside risk to our corn price forecast as well, Goldman said.
However, we believe the upside is likely capped near $8 a bushel by the potential for large ethanol demand destruction in the U.S.