Agricultural commodity commentators remain upbeats on prospects
for a recovery in cocoa futures, despite slashing price forecasts, while seeing
scope too for rises in corn and sugar – but not wheat or cotton.
A survey by FocusEconomics of price outlooks by forecasters
ranging from Australia & New Zealand Bank to Itau BBA flagged cocoa as a
particular target of estimate revisions – downward, with the consensus now for New
York futures to average $2,171 a tonne in the October-to-December quarter.
That represents a downgrade of $161 a tonne on the consensus
estimate in February, and is nearly $630 a tonne below expectations at the turn
of the year, before prices were dented by increased supply hopes – which were spurred
this week by International Cocoa Organization ideas of a long-term global structural
"Strong expected crops this year are putting further
pressure on prices, which have weakened significantly since the market produced
a surplus as a result of changing consumer behaviour," FocusEconomics said.
'Prices to edge up'
However, it remains above the $2,071 a tonne at which New
York's December contract was trading at on Friday, with a consensus forecast of
futures returning above $2,200 a tonne at the end of 2018 above the futures
In Chicago corn, forecasts were also a little more upbeat
than investors, seeing futures average $3.95 a bushel in the last three months
of this year, an upgrade of $0.05 month on month, and above the $3.87 a bushel
being priced in by December futures.
"Prices are expected to edge up somewhat as US farmers shift
away from corn," FocusEconomics said, flagging expectations that growers will
this year switch much land to soybeans instead, attracted by relatively high
forward prices of the oilseed relative to the grain.
Commentators have also turned sweeter on New York-traded
sugar, raising the consensus forecast by 0.3 cents a pound to 18.9 cent a pound
month on month, even as futures have tumbled, undermined by expectations of a
rise in world output in 2017-18.
Indeed, the price forecast is now above the level of October
futures, which were trading on Friday at 18.10 cents a pound.
However, commentators remain cautious over prospects for
wheat price gains, despite raising their forecast for Chicago futures in the
October-to-December period by $0.08 month on month, to $4.63 a bushel.
That remains some $0.20 a bushel below the level of Chicago's
December contract, with prices remaining under pressure from ample global supplies
– at least of lower quality wheat – and little evidence of northern hemisphere
crop damage from winter frosts.
And in New York cotton, commentators remain firmly bearish,
seeing prices end this year at around 69.5 cents per pound, compared with the 75.40
cents a pound at which December futures were valued at on Friday.
"Prices should decrease somewhat this year and next, as higher
prices make cotton plantings more profitable, attracting additional farmers and
driving up global production," FocusEconomics said.
Indeed, commentators cut their expectation for cotton
futures in late 2018 by 1.1 cents a pound to 67.9 cents a pound, below the
December 2018 contract price of 72.98 cents a pound.
Wool rally to end?
Also in the fibres market, commentators were cautious on
expectations for a further rise in Australian wool prices, raising their
forecast for year-end prices by 29 Australian dollar cents a kilogramme to 1341
cents, but remaining well below the record price of 1546 cents reported on
"The uninterrupted rise seen since the beginning of the year
came on the back of surging demand from Chinese buyers who have depleted their
stocks, coupled with a decreasing supply of wool from Oceania due to less favourable
weather conditions over the past months," FocusEconomics said.
However, Australian Wool Innovation took issue with ideas of
output decline saying that Australia, the top exporter, "is producing
approximately 3% more wool than last year and over 6% more first hand wool has
been offered so far at auction this year.
"Supply, or lack of supply as incorrectly stated by many, is
clearly not the driver of this market," said AWI, a not-for-profit organisation
paid for by a levy on Australian wool exports.
The group flagged instead that "growing demand for the Merino
fibre in particular is a fact, demand has actually been building for years.
"Many in the industry cite the growing use of wool against
the skin in sports and outdoor wear as a strong influencer in this growth"