Coffee – the arabica variety, at least - looks the pick of the soft commodities spectrum next year, spurred by production setbacks at a time of rising demand, Rabobank said, even as prices hit a 13-year high.
The bank said it had a "constructive outlook" on agricultural commodities in general, saying prices were underpinned by "precariously balanced fundamentals", with weather setbacks hitting production many countries, while China was leading demand higher.
However, arabica coffee appeared the best of the New York-traded crops, as Brazil, the top producer, approached an "off" year in its cycle of alternate high and low production seasons.
"In the last three low-cycle years, the global deficit for all coffee averaged 5.4m bags," Rabobank said, highlighting prospects for a production shortfall next year.
Record low stocks
And this after supplies of high quality beans had already been sapped by disappointing crops in Colombia, the second-ranked arabica producer, and Central America, where plantations have been hit by La Nina weather disruption as well as a short-term downturn stemming from widespread replanting programmes.
Meanwhile, demand was growing as emerging market consumers developed a taste for coffee, with consumption in China up 40% in the past two seasons, and Brazilians set to drink half their production in four years' time.
Rabobank arabica price forecasts
Q4 2011: 185 cents a pound
Q3 2011: 190 cents a pound
Q2 2011: 195 cents a pound
Q1 2011: 195 cents a pound
Q4 2010: 203 cents a pound
Stocks of arabica beans at the New York exchange have fallen to a record low of 1.7m bags, down from 3.1m bags at the start of 2010, and less than half average levels.
"We expect coffee prices in 2011 to remain high," Rabobank said, predicting that arabica prices, set to average $2.03 a pound in the current quarter, would remain at about $1.85 a pound even in the last quarter of next year.
The price of New York arabica beans surged 3.6% to 242.25 cents a pound on Wednesday, the highest for a near-term lot for 13 years, before profit-taking set in, driving the contract to 230.20 cents a pound by the close, down 1.6% on the day.
Arabica vs robusta
Indeed, arabica prices would continue to grow their premium over robusta coffee, the cheaper, London-traded variety of which Vietnam is the top grower.
"Roasters and end users continue to mix as much of the lower-value robusta in blends as possible, but added demand growth potential here is limited as roasters do not want the final product taste altered noticeably," Rabobank said,
Rabobank sugar price forecasts
Q4 2011: 22.0 cents a pound
Q3 2011: 24.0 cents a pound
Q2 2011: 26.0 cents a pound
Q1 2011: 28.0 cents a pound
Q4 2010: 28.4 cents a pound
"A blending wall has likely been reached for many coffee producers already."
Rabobank forecast a steady decline in sugar prices, to an average of 22 cents a pound by the last quarter of 2011, as the high values of this year spur production increases.
"Growers respond quickly to higher prices," the bank said, noting that doubling in prices in 2005-06 and 2009-10 supported output increases of 14% and 6% respectively.
Rabobank cotton price forecasts
Q4 2011: 85.0 cents a pound
Q3 2011: 90.0 cents a pound
Q2 2011: 115.0 cents a pound
Q1 2011: 135.0 cents a pound
Q4 2010: 125.0 cents a pound
Similarly, cotton prices were to fall back to an average of 85 cents in the last three months of 2011, thanks to a "considerable" response to farmers to prices which hit a record in New York on Tuesday.
And "lacklustre" demand growth in Europe and the US was set to depress cocoa prices - unless political instability mounted in Ivory Coast, the top producing country.