Rabo downbeat on US soy sowings, Brazil cane crop

Rabobank sounded a contrarian note on this year's US soybean sowings, forecasting a relatively small rise, as it unveiled bearish forecasts for prices of many agricultural commodities, bar soymeal and sugar.

The bank forecast that US soybean sowings will hit 78.5m acres this year, beating the 2009 record by some 1m tonnes, but a forecast far lower than that of other commentators.

Indeed, the US Department of Agriculture forecast of 79.5m acres is viewed by many commentators as too low, given the incentive to sow the oilseed offered by relative prices, with November soybean futures trading at about 2.4 times the price of December corn, an unusually high level.

Earlier this week, broker Doane Advisory Services pegged US soybean sowings this year at 83.6m acres, while Allendale last week estimated area at 83.2m acres, foreseeing setbacks to corn seedings from cold, as well as price influences.

'Prices will move'

Rabobank, noting that its forecast was "lower than other private estimates", said that its figure reflected a view "that prices will move in order to restore some balance in the US soybean/corn market.

Selected Rabobank grain price forecasts, change on previous and (gap from futures curve)

Corn, Q4 2014: $4.20 a bushel, +$0.10 a bushel, (-13%)

Soybeans, Q4 2014: $11.60 a bushel, unchanged, (-2%)

Soymeal, Q3 2014: $475 a short ton, unchanged, (+28%)

Wheat, Q4 2014: $5.60 a bushel, unchanged, (-22%)

Prices for quarter average Chicago spot contract

"Already in March we have seen the new crop soybean-corn ratio come down," although the bank acknowledged that it was still "historically high", if below levels approaching 2.6 late last year.

The bank trimmed by $0.20 a bushel to $12.40 a bushel its forecast for average Chicago soybean prices, on a spot contract basis, in the April-to-June quarter, citing Chinese cancellations of import orders, and a Brazilian crop which, while lower than initially expected, is still seen setting a record.

By contrast, the forecast for corn prices in the forthcoming quarter was raised by by $0.20 a bushel to $4.60 a bushel, thanks to strong US exports, although this remains below the futures curve, with Rabobank highlighting signs of increased selling of last year's record harvest.

The bank pegged US corn sowings this year at 93m acres, above the USDA's figure of 92.0m acres, Allendale's 92.3m acres and the 90.0m acres expected by Doane.

'Favourable crop conditions'

The bank was also downbeat on prospects for wheat prices, despite small upgrades to its estimates, foreseeing them fall below $6 a bushel in the next quarter in Chicago - well below the $7.00 a bushel that July futures were pricing in on Friday.

Selected Rabobank softs price forecasts, change on previous and (gap from futures curve)

Coffee, Q4 2014: 145 cents a pound, unchanged, (-18%)

Cotton, Q4 2014: 70 cents a pound, unchanged, (-12%)

Raw sugar, Q4 2014: 18.8 cents a pound, unchanged, (+3%)

Prices for quarter average ICE spot contract

Support to prices from worries over dryness in the southern US Plains, a major winter wheat producing area, "is expected to weaken on burgeoning global supply come the northern hemisphere summer", Rabobank said.

"Favourable crop conditions throughout the Black Sea region and the European Union continue to support our view of modest gains to the stocks of major wheat exporters for the 2014-15 season."

Strategie Grains on Thursday lifted by 200,000 tonnes to 137.7m tonnes its forecast for the EU soft wheat harvest this year, although some commentators have flagged concerns over dryness in central Europe, as well as Ukraine.

Cane downgrade

However, the bank, stuck by estimates for sugar prices in the second half of 2014 which are above the futures curve, citing the boost to values from drought in Brazil's Centre South, responsible for some 90% of output in the top producing and exporting country.

Indeed, Rabobank cut by 25m tonnes to 570m tonnes its forecast for the cane harvest in the Centre South in 2014-15, among the lowest estimates so far for the season, which starts next month, and in line with an estimate from co-operative giant Copersucar.

The bank slashed to 700,000 tonnes, from 2.1m tonnes, its forecast for the world sugar surplus in 2013-14, on an October-to-September basis.

It also lowered expectations for the 2013-14 Indian cane crop by 500,000 tonnes to 24m tonnes, while forecasting the next Australian harvest at 32.8m tones, constrained by "hot and dry conditions" in the sugar belt.

Separately, Canegrowers is believed to have cut its forecast for the next cane harvest by 2m tonnes to 32m tonnes, although has been unable to gain confirmation of this downgrade.

'Not available at any price'

Rabobank was also upbeat on prices of soymeal, seeing them average $475 a short ton in Chicago in the July-to-September quarter, $100 a short ton above the futures curve.

"US soymeal supplies are going to get extremely tight until new crop soybeans become available for crushing during the middle of the fourth quarter.

"Supplies of US soymeal will be extremely low from early June-July. It will be important for end users to secure physical needs for summer and early fall.

"It is possible that price may be irrelevant soymeal may not be available at any price."

Soybeans, sugar better bets than coffee or grains
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