Elevated Corn Prices Will Have Ripple Effect– Goldman (CORN) (WEAT)
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Elevated corn prices are likely to have a ripple effect on other agricultural commodities, such as wheat, according to analysts at Goldman Sachs.
Damien Courvalin, an anlalyst at the bank, said today he thinks the US drought will bring corn supplies sharply lower. This isn’t news to most traders. However, his predictions about its affect on other agricultural commodities, such as wheat, might be.
“To limit livestock liquidation, we forecast that wheat feeding will be required to supplement corn and DDG use in the US and globally. As a result, our base-case forecast remains that US wheat prices will need to trade back near corn prices by next spring, with our current price forecast embedding a smaller wheat-to-corn premium than currently priced into the CBOT future curves,” said Courvalin.
In short, Courvalin believes US wheat is caught between the need for stronger feed use given low US corn production and the potential for stronger exports given low global wheat supplies.
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Damien Courvalin, an anlalyst at the bank, said today he thinks the US drought will bring corn supplies sharply lower. This isn’t news to most traders. However, his predictions about its affect on other agricultural commodities, such as wheat, might be.
“To limit livestock liquidation, we forecast that wheat feeding will be required to supplement corn and DDG use in the US and globally. As a result, our base-case forecast remains that US wheat prices will need to trade back near corn prices by next spring, with our current price forecast embedding a smaller wheat-to-corn premium than currently priced into the CBOT future curves,” said Courvalin.
In short, Courvalin believes US wheat is caught between the need for stronger feed use given low US corn production and the potential for stronger exports given low global wheat supplies.
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