Grains look a better bet than soft commodities, thanks to
their differing appeals in terms of Chinese imports, Australia & New
Zealand said, in a report suggesting corn futures might yet set a fresh record
ANZ, in a report making forecasts for 2013, said that
commodities "with the greatest leverage to Chinese demand, and an improving US
backdrop, will be the strongest performers".
The assessment was based on a forecast that, while the
global economy will grow "below potential" this year, "emerging economies are
expected to remain relatively resilient, particularly China".
The US, the "best-placed of the main advanced economies",
could see "activity expand at a decent clip in the second half of 2013", if its
politicians can overcome disagreement over fiscal plans.
Corn to rebound?
Besides Brent crude, copper and palladium, the bank rated
grains among its "top picks", and certainly its "preferred exposure" among
Technical analysis also suggested gains for corn futures, after
Chicago's July lot "completed a classic correction" in retreating to $6.75 a
bushel and losing 50% of gains from last year's rally.
"Momentum indicators are also supportive," ANZ said.
"Projections suggest gains through last year's $8.24-a-bushel
high to at least $8.58-8.60 a bushel, if not a full move to $8.70-9.71 a bushel
Chicago corn in August set its current record of $8.43 ¾ a bushel, on a spot contract basis.
Softs vs grains
Meanwhile, soft commodities "continue to be weighed down by
surplus production", and face too the potential for relatively soft Chinese
"We anticipate weaker year-on-year import demand from China
in sugar and cotton, but ongoing strength in grain imports," ANZ said.
The bank also recommended investors buy six-month, 25 delta
options – puts in New York sugar and cotton and calls in Chicago corn and
It also suggested an outright sale of cotton, given China's
huge stocks, estimated close to 10m tonnes, and terming prices above 77 cents a
pound as "overvalued".
'Rumours of quality
The comments came as cotton extended a recent recovery, with
New York futures for March rising 0.5% to 76.62 cents a pound as of 07:00 local
time (12:00 UK time).
"It is above all the fear of continuing drought in key
growing regions of the US, especially in Texas, that is keeping the market on
tenterhooks," Commerzbank said.
"What is more, Chinese cotton imports soared by 75%
month-on-month in December," amid talk that much of the crop was of inferior
"Although China is releasing cotton from its reserves,
rumours of quality problems are circulating which may prompt some spinning
mills to import higher-quality cotton," the bank said.
However, with world cotton stocks still expected to end
2012-13 at a record high, further prices looked more difficult for now.
"For the time being, the high international reserves are
likely to limit the upside price potential."