Goldman Sachs, which two weeks ago cut its forecast for wheat futures, signalled a further downgrade as brokers continued to issue warnings over prices following a lift to hopes for world supplies of the grain.
Goldman analysts, who on September 30 lopped up to $1.50 a bushel from forecasts for Chicago wheat futures after data showed US inventories surprisingly strong, said that even these price projections may be optimistic.
"We see downside risk to our forecasts," the investment bank said, forecasting that, pressed by "elevated inventories", wheat prices would "underperform".
The caution came amid a continuing wave of negative outlooks for wheat prices, after the US Department of Agriculture in a benchmark report on Wednesday lifted by 7.8m tonnes, to a 10-year high of 202.4m tonnes, its estimate for world inventories of the grain at the close of 2011-12.
The forecast reflected stronger hopes for production, notably in Australia, where crops received September rains described by one bank as "yield saving", and Kazakhstan, which the USDA said had enjoyed "near-perfect summer weather".
On Thursday, Paul Gregory at US broker Allendale said the revised estimates were "definitely bearish wheat".
In Singapore, Lynette Tan at Phillip Futures said that the report, the latest in the USDA’s monthly Wasde series, "was bearish overall for wheat as supplies in wheat producing countries were mostly up, with the main exporters continuing to provide competition to US wheat with cheaper prices
In Europe, analysts at German-based Commerzbank said the fresh forecasts "suggest the supply situation is considerably easing".
"Three months ago, the USDA was still expecting a global market deficit of 8m tonnes [in 2011-12], while it now anticipates a supply surplus of 7m tonnes."
On futures markets, Chicago wheat for December stood 3.2% lower at $6.06 ½ a bushel at 16:00 GMT, adding to 5% losses in the last session, with London wheat for November 1.4% lower at £145.50 a tonne.
Paris wheat for November was 1.6% down at E182.75 a tonne.
Corn vs soybeans
Goldman added that its forecasts for corn futures, at $6.15 a bushel in three month and six month time horizons, were "sufficiently elevated" to achieve demand rationing implied by Wednesday’s USDA data, which lifted estimates for US corn stocks.
"The still-tight US corn balance suggests the ongoing need for demand destruction," the bank said.
However, it maintained a forecast that soybean prices would "outperform" corn, rising to about $13.00 a bushel by the spring, helped by an unexpected trim on Wednesday by the USDA to its estimate for domestic inventories at the close of 2011-12.
"The tightening of the soybean balance relative to the corn balance requires that soybean prices either outperform corn prices in coming months to secure sufficient acreage, or will need to rally sharply next summer to achieve demand destruction in the face of lower supplies."