Next year may bring an end to the downtrend in wheat prices,
which have set a series of contract lows in US markets, with cotton looking a
good bet too for early 2014, Macquarie said.
The bank in outline forecasts for agricultural commodity
prices next year, echoed the likes of Goldman Sachs and Rabobank in foreseeing
"In our base case, we expect the balance of risks tilting to
the bearish side in the agri commodity space, continuing the trend seen in 2013,"
the bank said.
"A strong recovery in harvests around the world this year in
the grains and oilseeds means stocks should be much more replenished in 2014
compared to a year ago."
'Expected to remain
However, wheat looks among contracts best able to withstand bearish
pressure, Macquarie said, rating the grain a "bullish" bet for the first half of
"World wheat seaborne supplies are expected to remain tight
in the first half of 2014.
"As corn drags the grains complex lower, wheat could soon
become too cheap, attracting additional import demand."
Wheat has put in a poor finish to 2013, standing down more
than 7% this month in Chicago, where soft red winter wheat is traded, and 9% for
Kansas City hard red winter wheat, depressed by a large upgrade to the Canadian
crop, and to concerns over US logistics, with ports struggling with large corn
and soybean volumes.
In fact, "US origin wheat could win back Brazilian demand as
it is now cheaper than Canadian wheat".
Cotton too should start the year "constructively", supported
by tight supplies of cotton in cash markets, and with dynamics in China, the
top consumer, producer and importer of the fibre, remaining supportive.
"China is committed to maintaining its existing support
programme for 2013-14.
"This, along with healthy demand could result in strong US
exports, leading to tighter US and ex-China global stocks."
Year of two halves
However, cotton looks placed for a weak second half to next
year, "as world cotton acres rise", and with the prospect of a revision to
China's support policy.
For wheat too, the second half of 2014 looks likely to be
more bearish for prices than the first, given the prospect of decent harvests.
Separately, Brian Henry at broker Benson Quinn Commodities
noted that in the US "many key hard red winter wheat growing regions received
snow fall," meaning protection from frost, a factor "which adds to the fact
that few very wheat growing areas in the northern hemisphere have faced much in
the way of obstacles".
Cocoa, "the only market expected to be in outright deficit",
should provide hope to bulls in the second half of 2014, and sugar too.
"Sugar is already very cheap, and supply has begun
responding to this," Macquarie said.
"As we enter 2014-15, the market will be more balanced and
we should see a rebound [in prices] in the second half of 2014."