Palm oil and coffee represent the best bets in agriculture
for 2013, with corn and wheat among the worst, Rabobank said, saying that this
year's decline in soft commodities shows the path that grains will take.
The bank, opening the round of broker forecasts for price
next year, said that grain and oilseed prices could enjoy a strong start to
2013, "as a supply squeeze builds pressure and prices are forced higher to
Rates of consumption are "running too fast, given the
sub-optimal crops" in both the US and South America.
"Higher prices early in the new year are important to
encourage record plantings of row crops in the US during 2013," Rabobank, a
major agricultural lender, said.
However, these high sowings will result in a "small global
surplus" resulting in, for Chicago wheat, prices falling back from levels above
$9 a bushel in the first quarter of 2012 to average $7.00 a bushel in the last.
Paris wheat will fall from E290 a tonne close to E200 a
World wheat inventories will be replenished by US sowings expected
to reach a five-year high of 43.4m acres the grain is substituted for cotton,
which has offered poor returns, in the southern Plains, "particularly in Texas".
Output in the Black Sea will rebound nearly 24m tonnes to 88m
tonnes, boosted by a recovery in harvested area, assuming no repeat of the
drought, the damage from which farm operator Trigon Agri highlighted on
"The expansion in Russian wheat production will be a key
bearish influence in the grains complex, with harvested area expected to rise
to 3m hectares to 25, hectares, the largest since 2009-10."
'Key bullish factor'
Corn will retreat in 2013 from a first-quarter high of
nearly $8 a bushel to $6.00 a bushel by the October-to-December period, sapped
by record South American harvests, with Argentina and Brazilian output pegged
at a combined 97.3m tonnes, and a further rise in US seedings.
US corn area will rise 700,000 acres to a 77-year high of
97.6m acres, largely thanks to raised sowings in the northern Plains, with Midwest
growers reluctant to boost further corn-on corn sowings, following successive
seasons of yield disappointment.
The extra corn area will come in part at the expense of
soybeans, for which US seedings will drop by 400,000 acres to 76.8m acres – one
reason for Rabobank's less downbeat view on prices of the oilseed, seen falling
from a first-quarter average of $14.75 a bushel to a last-quarter $13.00 a
China's "seemingly inelastic" demand for soybeans will also
be a "key bullish factor" for prices, as the country's "structural shift
towards increased soybean imports persists".
"We expect China's demand will remain strong, rising to
nearly 30% of global soybean consumption, up from only 15% 10 years ago,"
Back to the future
The path for grains and soybeans of a strong start to 2013
followed by a weaker finish will echo that which many soft commodities have
followed this year.
"Increased supply resulted in strong downward corrections,
as coffee cotton and sugar were the worst performers of liquid agricultural
commodities in 2012," the bank said.
"The softs have already moved through the cycle we expected
for the grain and oilseed sectors in 2013."
However, arabica coffee, trading at 143 cents a pound on a
front-contract basis on Wednesday, will recover to average 170 cents a pound in
the first quarter of 2013, and still see some upside later in the year, Rabobank
The forecast reflected expectations of the world market
returning to a production deficit next year, an "off" season in Brazil's cycle
of alternate higher and lower yielding years.
Pressure on production will be heightened by weak prices
which will, in a range of countries, "reduce incentives to use inputs, and thus
moderate yield potential in the short-term".
On demand, arabica will do better at holding its own against
robusta, after shifts of 3m-5m bags to the rival beans in 2010 and 2011, encouraged
by price differentials.
"We anticipate arabica prices will hit a bottom in 2012,
with a positive outlook in 2013 based on new-season fundamentals and increased
Rabobank rated Kuala Lumpur palm oil its most bullish bet on
a 12-month horizon, foreseeing a return to 3,000 ringgit a tonne from a close
on Wednesday of 2,394 ringgit a tonne.
Prices will rise "as stocks are drawn down from record-high
levels", with the "bearish sentiment which has persisted… likely to wane as
production slows seasonally in early 2013".
Demand, meanwhile, will be whetted by a small increase in Indian
imports, of some 2% in 2012-13, "to meet growing food demand", while Chinese
purchases "may approach record levels".
Declining availability of oilseeds in China, exacerbated by
poor prospects for imports of Canada's disappointing rapeseed crop besides the
well-documented hiccups to world soybean supplies, "is likely to continue to
drive import demand for palm oil in 2012-13".