Live cattle and
soybean futures represent the best investment for agricultural commodities heading
into 2013, and cocoa and corn the worst, Societe Generale said – although its
bovine bet jarred with some other analysis.
The bank said that,
while it was still bearish on grains and oilseeds for 2013 as whole, soybeans had
been "temporarily oversold, and could see relative support into January" helped
by strong demand, both within the US and for exports, besides risks over South
America's ongoing sowings.
weather in South America has continued to delay planting, potentially reducing
yields and causing some farmers to shift to lower yielding short-season seed
varieties," Societe Generale analyst Jeremy Friesen said.
that the weather would "ultimately cooperate sufficiently to enable a record
harvest in early 2013, near-term risks to supply and a rebound in US export
demand should prove supportive near-term" to prices.
The comments came
ahead of official data on Thursday showing US export sales of 1.32m tonnes last
week, the best result of 2012-13, and well above market expectations.
The figure sent
January soybean futures up 0.7% to $14.83 ½ a bushel in late morning
deals in Chicago.
SocGen also named live cattle among its top short term
commodity bets -along with copper, lead and West Texas Intermediate crude –
saying that high meat prices in the US were a reflection of "resilient consumer
demand in the face of tighter markets".
"The fiscal cliff may impact consumer sentiment ahead of the
holidays, but winter meat demand may be more resilient, keeping live cattle
markets tight," Mr Friesen said.
Indeed, "robust" demand was coming at a time when cattle
being fattened on US feedlots were down 5.3% year on year, with placements of
new animals tumbling 12.5%, discouraged by high feed costs.
Such data suggest lower supplies ahead of cattle for
slaughter, and thereby of beef.
The comments come at a time when live cattle prices are
already at elevated levels, with Chicago's February contract, the best-traded
lot, standing at 132.00 cents a pound, within 2 cents of the record high for a nearest-but-one
contract set three weeks ago.
The rise reflects strong wholesale meat prices which, at 195.78
cents a pound as of yesterday for the more expensive choice beef, were up 7.10
cents year on year.
However, futures were already factoring in prices of the
cut-out remaining high, at some 206-209 cents a pound, which will require all
parts of the carcass to show strong prices in the post-holiday period.
This year ribs, which typically start the year weak, showed
a larger-than-average drop, of 13%, which chuck, which usually begins strongly,
struggled to offset, appreciating by 2% compared with the typical 11%.
"If we have a similar performance this year, needless to say
it will be quite difficult to hit the cattle prices futures are currently indicating,"
a report from Paragon Economics and Steiner Consulting said.
"A more balanced market is needed for expected record prices
to become reality."
'Prices should drift
SocGen rated corn among its worst bets in part because of
the impact of lower livestock numbers, encouraged by high grain prices.
With higher gasoline supplies "likely to further weigh" on the
market for ethanol, "hog slaughters and feedlot inventories at extreme highs
and lows, respectively, and a mild winter forecast for much of the lower 48
states likely to maintain good feed efficiency, corn prices should drift lower",
Mr Friesen said.
A negative short-term outlook on cocoa was also related to
weather, which has improved in the major West African producing countries,
besides the impact on demand of US and European economic worries.
"Dry weather in West Africa that is aiding the delayed
harvest and drying ahead of the seasonal Harmattan winds from the Sahara," he
"On the other hand, demand concerns are likely to rise with
US and Europe facing further fiscal headwinds into January.
"Net, March cocoa prices are likely to remain under