Barclays Capital forecast a revival in grain and oilseed
prices, even as they lost further ground on Monday, but flagged a poor
prospects for sugar futures, which it saw performing far worse than investors
have factored in.
The investment bank said it saw "further potential upside
for some agricultural commodities", notably the main Chicago crops, thanks to a
lack of success for high prices in curtailing demand.
While prices continued to decline on Monday, when the benchmark
November soybean contract fell at one point below $16 a bushel for the first time in a
month, the continued decline in prices in recent weeks reflected pressure from
the one-off rise in supplies brought by harvest, an effect which would soon
"Prices have softened in the near term as the US harvest
progresses, but beyond seasonal pressure, we do not expect weakness to last
long," BarCap analyst Sudakshina Unnikrishnan said.
rationing in order'
For corn, while acknowledging that high prices have "led to
rather weak US export sales demand over recent weeks", Ms Unnikrishnan flagged
a revival in consumption of the grain by ethanol plants.
"While demand has been softening, with the precarious level
of US inventories, we believe further demand rationing is in order to keep
inventories at minimum required levels," she said.
Barclays Capital crop price forecasts for Q4 2012 and (2013 average)
Cocoa: $2,600 a tonne, ($2,683 a tonne)
Coffee: 168 cents a pound, (171 cents a pound)
Corn: $7.90 a bushel, ($7.99 a bushel)
Cotton: 71 cents a pound, (73 cents a pound)
Soybeans: $17.15 a bushel, ($17.33 a bushel)
Sugar: 19.0 cents a pound, (18.0 cents a pound)
Wheat: $8.95 a bushel, ($9.09 a bushel)
"Corn prices will need to stay high enough to incentivise US
acres," in spring plantings next year, "competing with record high soybean
Corn prices, as measured by Chicago's front month contract, will
average $7.90 a bushel in the last quarter of this year, nearly $0.50 a bushel
above where the December lot was trading on Monday, and at $7.99 a bushel in
2013 – also well above the futures curve.
Prices will move "higher in the fourth quarter of 2012,
remaining elevated through the 2012-13 marketing year".
'Keep prices elevated'
Soybeans will see "a move above $18 a bushel", implying a
fresh record high, after harvest pressure wanes, Ms Unnikrishnan said, noting a
"lack of evidence of demand rationing so far despite elevated prices, with
weekly US exports remaining in rude health.
"Tight global supplies following a series of production downgrades,
strength in Chinese import demand, extremely low US inventories and the year on
year drop in South American inventories will keep prices elevated."
BarCap forecast prices averaging $17.30 a bushel next year,
well above prices that futures are pricing in, with the November 2013 contract
trading at $13.44 a bushel on Monday.
And for wheat, the bank said it was "positive" on price
prospects, seeing Chicago prices averaging $9.09 a bushel, a little more than
futures are counting on, noting that wheat stocks in many leading exporting
countries were expected "to post double-digit year-on-year declines in 2012-13".
Stocks in exporter countries are particularly important as
they are the ones that importers rely on for supplies, rather than the
estimated 31% of world inventories tied up in China "which are not going to
find their way to the global market".
'Expected to dampen
However, the bank sounded a downbeat note on sugar prices, despite
coming in with an estimate for the world production surplus in 2012-13 which,
at 4.8m tonnes, was lower than some other forecasts, such as one last week from
"The global sugar surpluses in 2011-12 and 2012-13 are
likely to add to global stocks," BarCap analyst Kate Tang said.
Crop prices at close on Monday
New York sugar (October): 19.50 cents a pound, (+0.6%)
Chicago soybeans (November): $16.10 a bushel, (-0.7%)
Chicago corn (December): $7.44 ¾ a bushel, (-0.7%)
Chicago wheat (December): $8.92 a bushel, (-0.7%)
Paris wheat (November): E260.50 a tonne, (-1.2%)
"Remaining in surplus territory should allay supply concerns
and help inventories to rebuild from recent lows.
"This surplus, along with slowing demand, is expected to
dampen prices," which will average 18.0 cents a pound next year well below
levels of more than 20 cents a pound futures are pricing in.
'Brazil is getting
Crop prices on Monday failed to conform to the direction set
by BarCap, with raw sugar for October rising 0.6% to 19.50 cents a pound,
boosted by talk of rains disrupting cane harvesting in Brazil.
However, the rains are seen as positive for soybean sowings,
providing moisture for dry soils, so fostering a 0.9% drop in futures in the
oilseed, with a tumble in palm oil futures depressing the complex too.
"Brazil is getting enough rain to pre-empt widespread
planting delays, although the north-west half of their growing area still leading
dry for next 10 days," Richard Feltes at broker RJ O'Brien said.
He also flagged, "tepid corn export demand, fund
liquidation, better than expected soybean yields and poor chart action" in
Wheat, the price leader early in the day, turned Chicago's
weakest contract, softened by forecasts for much-needed rain in Western Australia,
with the December contract's failure to hold its 50-day moving average further stoking