Crop futures have the worst prospects in the raw materials complex for 2012, and are alone set for price falls, underperforming livestock and, in particular, industrial metals, Goldman Sachs said.

The bank recommended investors keep an "overweight" position in commodities as a whole, citing the ability of emerging market demand, backed by Chinese economic growth forecast at 8.6%, to make up for soft Western consumption.

"Clearly, the European debt crisis remains a significant downside risk in 2012," Goldman said.

"But as long the risks manifest themselves in economic weakness and not in financial stress that would likely precipitate a global recession, via trade credits and banking systems, it is unlikely to severely impact commodity markets."

"This was the lesson from 2008, as the US was in recession starting in December 2007 and Europe was in recession by May 2008, but commodity markets traded higher as emerging market economic activity and commodity demand remained strong until financial stress created a global recession."

Advice to growers 

However, while the average commodity will give returns of 15.0% over the next year, as measured by the Standard & Poor's GSCI Enhanced Commodity Index, an early-2012 rally in crops will peter out, leaving investors with long positions facing a loss of 5.1%.

In cotton, "the moderate decline in prices that we expect suggests that producers should lock in current deferred prices".

But livestock investors can expect positive returns of 10.5% over the next year, lifted by emerging market demand for protein.

"We expect that demand for meat will continue to improve, driven largely by strong emerging market income growth, with the US Department of Agriculture expecting further growth in [US] exports in 2012."

Near-term prospects

The comments come amid a rash of forecasts for asset performance in 2012, and follow reports from the likes of Morgan Stanley, Societe Generale and UBS, which were more positive on crop price prospects.

Morgan Stanley on Wednesday rated corn and soybeans as ranking behind only gold in prospects.

Goldman Sachs was more upbeat for crops' shorter-term prospects, restating forecasts that Chicago's near-term corn lot will average $6.70 a bushel in the first three months of 2012.

Corn for March stood at $6.08 ¾ a bushel at 09:45 GMT on Thursday, up 0.1% on the day.

"Our expectation for low corn inventory coverage, combined with large wheat supplies and improving prospects for South American soybean production, lead us to expect that corn prices will continue to trade at an historically large premium to both soybean and wheat prices in coming months," the bank said.

The extent of a retreat in corn prices, of more than $1.50 a bushel since the end of August, poses "growing risks that prices remain below levels needed to limit demand growth, further drawing already low corn inventories".