Cocoa is the best bet among soft commodities, Commerzbank
said, forecasting price rises – in contrast to somewhat bearish expectations
for coffee and, especially, sugar futures.
The bank termed "exaggerated… the slump" in New York cocoa futures
which took them to $1,881 a tonne last month - a nine-year low on a spot
contract basis, and down 45% from a high set in late 2015.
While acknowledging the "huge rise" in world cocoa output in
2016-17 - backed by estimates of a record crop in top producer Cote d'Ivoire - the
bank viewed as overplayed ideas voiced by the International Cocoa Organization
last week of global production surpluses for years ahead.
"We are sceptical at the moment that ICCO concerns about a
period of structural surpluses on the cocoa market are justified."
'Fraught financial situation'
Commerzbank cautioned that the Cote d'Ivoire cocoa sector is
in fact "plagued at present by problems that could dampen the longer-term outlook
Farmers are facing a "fraught financial situation", in the
face of contract cancellations prompted the weak prices, with tight purse
strings likely to prompt cutbacks in use of measures to boost yields and tackle
The bank forecast the recovery in in cocoa futures, which for
May delivery stood at $2,164 a tonne on Friday to "continue for a while".
Futures were seen averaging $2,300 a tonne in the October-to-December
period, above the $2,183 a tonne at which the December contract was trading at
'Prospect of another
However, on coffee the bank - while raising its forecast for
the price of London-traded robusta beans over the October-to-December period by
$100 a tonne to $2,100 a tonne – left it below the futures curve.
November futures are trading at $2,199 a tonne.
Commerzbank flagged higher expectations for robusta output in
Brazil as well as Vietnam, the top grower of the bean, with growing conditions
seen as improved from the weather-affected levels of last year.
Still, seeing New York-traded arabica futures trading ending
the year at 145 cents a pound, close to the current market level, the bank
cautioned investors against being too pessimistic on coffee prices, given that 2017
will be an "off" year in Brazil's cycle of alternative higher and lower arabica
"The prospect of another deficit on the coffee market is
likely to lend further support to prices."
Sugar price forecasts
In sugar too, the bank flagged the potential for being
unduly bearish on prices – even as it slashed its forecasts for New York prices
by up to 3.0 cents a pound, seeing futures average 17.0 cents a pound in the October-to-December
That is below the 17.86 cents a pound October futures were priced
at on Friday.
While many commentators believe world output will exceed
consumption in 2017-18, after two years of deficit, "only when a significant
surplus can actually be foreseen for the coming season should prices fall on a
The bank cited growing doubts over India resorting to sugar buy-ins,
saying it is "still unclear whether India will have any imports at all", as key
to the 10% tumble in sugar futures over the past month.
After dryness hurt India's 2016-17 cane crop, constraining
sugar output to an estimated 20m tonnes, "a strong recovery in production is
expected in 2017-18, with most estimates being at least 25m tonnes".