Hopes for China will give commodities a "positive" close to
2012, Australia & New Zealand Bank said, even as doubts emerged in grain
markets over investors' appetite, given concerns over the US fiscal cliff.
At Chicago-based broker RJ O'Brien, Richard Feltes, warned
that, even if US politicians agree on a budget package and avoid the severe
measures – the so-called "fiscal cliff" - due to come into force at the start
of 2013, concerns over the alternative measures will depress investors'
"Uncommitted discretionary capital will be understandably
cautious about investing in any asset class in the first half of 2013 until
evidence emerges that the US economy is not materially damaged by White House's
perceived mandate to raise tax rates," Mr Feltes, vice-president, research at RJ
"The implication for the grain markets is clear," he added,
flagging the importance of supply or demand factors to support values.
"The negative ramifications for the US economy will require
strong standalone fundamentals to take ag markets measurably higher next year
as discretionary investment capital will not be flowing to the commodity sector
as readily as in recent years."
ANZ acknowledged the "shadow still persists" of a "less than
favourable outcome on US fiscal negotiations".
"Speculative positioning is extremely long in both corn and
wheat markets, leaving them particularly vulnerable to bouts of negative
financial market sentiment."
However, it forecast that the expectation of stronger
Chinese demand in 2013" would offset in commodity markets fears over the US
"We expect commodity markets to finish the year  on a
positive but choppy note," the bank said expecting "prices to improve as
investment funds front-run a better China outlook for 2013".
"The buzz of improving Chinese data should continue," reflecting
growth which will, in agricultural commodities, see "strong import demand
continue for grains", for which imports in the January-to-October period topped
10m tonnes for the first time for some 15 years.
"The restocking phase for sugar and oilseeds looks more
complete," ANZ said.
'Bullish on grains'
The comments came as the bank made a "bullish" call on
prospects for grain prices, flagging threats to Argentina's corn crop from the
persistent rains which are slowing plantings, and to weather threats to wheat
in the former Soviet Union and the US.
"Enough weather concerns exist short-term to keep grain prices
risks skewed to the upside," the bank said, flagging reports that up to 25% of
Ukraine and Russian winter wheat may be at risk of winterkill, thanks to warm
temperatures which have ill-prepared crops for winter dormancy.
ANZ also recommended a trade of buying May soybean futures,
hedged against a short position in the November contract, to exploit a movement
in spreads between contracts the bank foresees to ration demand for the oilseed
follow poor US and South American harvests in 2012.
"Strong US soybean crush and exports in the September-November
quarter indicate prices are still not high enough, or spreads tight enough, to limit
demand," ANZ ag commodity strategist Victor Thianpiriya said.
"The best chance for a rally in soybean spreads is early in
However, the bank made a "neutral" call on soft commodities,
warning that Asian buyers are "particularly well covered by new production at the
time of the year".
"Seasonally, prices are unlikely to fall as the market is
most susceptible to diminishing seaborne supplies as Brazil's sugar exports
"However, many markets globally are also contending with new
domestic production replenishing supplies and capping prices."
For cotton, prices look set, for now, to remain within the
6-cents-a-pound range they have trod since June.
A combination of uncertainty over China's plans for its huge
cotton inventories "and the slowdown in the European economies is keeping
participants in the textile pipeline cautious."