Goldman Sachs became the second bank in two days to warn on arabica coffee futures, cautioning over cocoa and sugar prices too - but foreseeing a bright outlook for cattle investors.
The bank, in a monthly update, kept stable its much-watched forecasts for grain and oilseed prices, forecasting that soybean values will come under pressure from rising South American output, and seeing "potential for further outperformance" of wheat futures relative to corn.
"Fears that Russian production will come in below the US Department of Agriculture's forecast, and additional weather damage to Argentina's crop, point to a larger deficit in the global 2013-14 wheat market than previously expected," Goldman said, if sticking with a $6.50-a-bushel wheat price forecast, well below the Chicago futures curve.
Argentina's farm ministry late on Thursday pegged the domestic wheat crop, which has been hurt by frost and dryness, at 8.8m tonnes, well below forecasts from other commentators, with the US Department of Agriculture pegging the crop at 12m tonnes.
However, Goldman cut by 10 cents to 120 cents a pound, on three-, six- and 12-month horizons, its forecast for arabica coffee futures, flagging the pressure on prices from larger-than-expected Colombian output and "favourable" weather so far for Brazil's crop to be harvested in 2014.
Already, the surplus forecast for 2013-14 "will bring stocks to their highest level in five years", the bank said, following Societe Generale in undermining coffee bulls' hopes of a price recovery.
SocGen earlier this week rated coffee among likely worst performers in the commodities complex short-term, highlighting the pressure on prices from a "global surplus".
"Recovering Central American production should help reverse even the modest rebound seen over the past few weeks," SocGen said.
"There are indications of better grinder demand, but arabica prices are likely to remain flat or down near term."
Goldman also cautioned over prospects of further gains in cocoa and sugar prices, despite raising its forecast for futures in both in terms of expectations for levels around April 2014.
While raising its forecast for New York cocoa prices by $100 to $2,500 a tonne, this remains below the $2,712 a tonne that May 2014 futures were pricing in on Friday.
The bank, although acknowledging the prospect of a second successive world cocoa production shortfall in 2013-14, highlighted the risk of a sell-off by hedge funds, which have raised their net long position to a record high "despite a still-high cocoa stocks-to-use ratio".
'Excessive price recovery'
For raw sugar futures, for which Goldman lifted its medium-term price forecast by 1.5 cents to 19 cents a pound, the bank termed the "excessive" the recovery in the sweetener's price.
Raw sugar futures on Friday soared above 20.00 cents a pound for the first time since February, with a fire at a warehouse at Brazil's main sugar export port, Santos, adding to buying pressure over the last month fuelled by concerns of rains slowing the country's cane harvest.
While the rains and Brazil and Russia, and resilient imports by China and Indonesia, point to a tighter world sugar balance sheet than had been thought, the world still faced a "fourth consecutive inventory build" in 2013-14.
'Signs of tightening'
Goldman was more upbeat over live cattle, raising its forecast for Chicago prices by 4 cents a pound, for short and medium term horizons, to levels at or above the futures curve.
Beef supplies were already showing "signs of tightening", a dynamic that looked set to continue given the drop in placements on feedlot shown by last month's US Cattle on Feed report.
"Further, beef exports remain strong while imports are slowing," while improving pasture condition "will incentivise heifer retention and limit beef supplies" into 2014.
"Net, these catalysts have brought prices above our forecast," Goldman said, adding that the risk to cattle prices is "skewed to the upside" given the risk of the reduced use of feed supplements, such as Zilmax, which are used to raise slaughter weights.