This year's worst-performing agricultural commodities
represent the sector's best hope for 2013, Commerzbank said, saying that investors
have already priced in downside to crops such as cotton and sugar.
The bank, while acknowledging the tight stocks in corn and
oilseeds - which many banks such as Morgan Stanley have tipped for a rebound –
said that the supply situation "should ease, with prices declining".
Chicago corn prices should average $6.20 a bushel in the last
quarter of next year, below the level that futures are pricing in, as the
current elevated values, close to $7.50 a bushel, stimulate US sowings.
And wheat futures will average $7.50 a bushel in the
October-to-December period next year, more than $1.30 a bushel below the futures
While many northern hemisphere crops have started poorly, "it
is still unclear whether this will actually be reflected in a poor crop.
"We see no grounds for a horror scenario at present. Rather,
we expect the wheat market to ease moderately in 2013-14 – not least because
global wheat acreage will increase by 2% according to the International Grains Council."
However, Commerzbank saw potential in prices of many of the
commodities which have performed poorly this year, echoing a forecast from Rabobank last week that the path the likes of sugar have taken this year will
be followed by grains in 2013.
Investors are underestimating the potential for New York cotton futures, which will end 2013 at around
80 cents a pound, as weak prices drive many growers to plant soybeans instead
for 2013-14, and help drive the market into a production shortfall.
"A much lower supply of cotton could result in a market deficit
for the first time in four years.
"This should give moderate lift to prices despite high
stocks. This trend could be supported by a change in sentiment among
speculative market players, who are mainly betting on falling prices at
'Risks to the upside'
And investors are underrating by even more the potential for
gains in New York sugar prices, which are poised to revive to 22 cents a pound
in the fourth quarter, well above futures, despite the early market musings of
a further recovery in Brazilian output in 2013-14.
"As we believe that most negative news for prices is now
already priced in, we tend to see risks to the upside," Commerzbank said.
"Sugarcane could remain on the fields for weather reasons or
growing conditions could deteriorate over the next few months."
The forecast switch by Brazil to encouraging more use of
ethanol - which competes with sugar for cane in the South American country -
could also support values, as would higher oil prices, in making production of
the biofuel more profitable.
Big rebound ahead?
However, the greatest potential for prices rise was in arabica
coffee, which the bank saw averaging 220 cents a pound in the
October-to-December period – one-third above New York December futures.
Commerzbank acknowledged that supplies had been boosted by a
record Brazilian harvest, and initial expectations of a another "good" crop in
2013 from the top arabica-producing country, albeit one which will represent an
"off" year in Brazil's cycle of higher and lower seasons.
However, "although there is no shortage of arabica coffee at
present, prices for this coffee type should pick up in the next few months as
the expectation of a smaller next crop due to the coming low-yield year in
Brazil, should soon have more of an impact on pricing".
The rising trend of inventories for delivery against New
York futures, whose 62% rise this year has been a major depressant on prices, "should
Indeed, it is robusta coffee, the cheaper variety which
investors have favoured of late, which
looks set to underperform in 2013, pressed by a harvest in top producer Vietnam
which could approach last year's record of 24m bags.
"The availability of two high Vietnamese crop yields in
succession, reflected in a 40% rise in exports in the first 10 months of 2012,
year-on-year, will probably prevent any large robusta price surges in the
foreseeable future," Commerzbank said.
The forecasts are the latest in a series of forecasts for 2013 from banks including Goldman Sachs, Morgan Stanley and Rabobank.