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A previous forecast price for corn of $9 a bushel was lowered by $0.75 following last week’s U.S. Department of Agriculture’s (USDA) most recept World Agricultural Supply and Demand Estimates (WASDE). The USDA now estimates the 2012-2013 season-average farm price for corn at $6.95 to $8.25 a bushel. Goldman Sachs also lowered its estimate on Friday, to $8.25 a bushel over the next six months at the Chicago trading point.

Wheat prices, once forecast at $10 a bushel, will average $7.75 to $8.25 a bushel according to the USDA, while Goldman has a price of $9.50 for Chicago-traded corn. Soybean prices are now estimated at $13.90 to $15.90 a bushel by the USDA and $16.50 by Goldman Sachs. Given that March soybean futures were just over $14 a bushel on Friday, the Goldman estimate may be somewhat optimistic.

The lower prices primarily are the result of higher production estimates for corn and soybeans, while wheat stocks are expected to rise as U.S. exports decline. The USDA raised its corn production forecast for the 2012-2013 crop year by 19 million bushels and soybean production is expected to rise by 3.2 million tons. Wheat exports are expected to fall by 50 million bushels.

While these new estimates could lower prices for everything from ethanol-blend gasoline to corn flakes, a Goldman analyst is cited as saying:

Our fundamental outlook and projection for very low levels of inventories across all three major crops points to higher price volatility in coming months. The potential wide distribution of future crop prices is currently mispriced by the options market.

Corn prices are down about 3% today at about $7.16 a bushel, while wheat is down 2.9% at around $8.60 a bushel and soybeans are price around $14.10 a bushel.

Paul Ausick