Goldman Sachs: Get Ready for Lower Food Prices

Goldman Sachs (NYSE:GS) has reversed their forecast from two weeks ago that suggested corn, wheat, and soybean prices would be higher this fall due to reduced harvests. After Friday’s U.S. Department of Agriculture announcement on acreage planted, Goldman is cutting price forecasts on the commodities (NYSE:RJA).

While Goldman predicts that prices will remain high in the fall, by December 2011 they predict the price of a basket of farm products will be 7% lower year-over-year. Corn and wheat prices are already down. The news comes as a relief to food processing companies whose stocks are showing gains for the first time this year. Companies have been forced to increase prices to adjust for the higher cost of ingredients in their products. The fourth quarter of 2011 and the first half of 2012 could witness dropping costs while prices remain high, increasing companies’ revenue.

Stocks to watch: Archer Daniels Midland Co. (NYSE: ADM), Bunge Ltd. (NYSE: BG), Tyson Foods, Inc. (NYSE: TSN), Smithfield Foods Inc. (NYSE: SFD), Kraft Foods Inc. (NYSE: KFT), ConAgra Foods Inc. (NYSE: CAG), General Mills Inc. (NYSE: GIS), and Kellogg Co. (NYSE: K).