Rabobank raised its forecast for corn prices, but retained a
somewhat "bearish" outlook, while undertaking the opposite manoeuvre on cocoa –
cutting its forecast for values but sticking by the bean as its top ag bet.
The bank lifted its forecasts for quarter-average Chicago
corn prices by $0.20 a bushel across the board, citing the threats to Argentine
output from floods, at a time of "strong" world demand, besides support from the
rally in rival crop soybeans.
"Corn prices remain tethered to soybean prices in the short
term, which should provide some support for the next month due to increased production
risks and weather volatility," the bank said.
Meanwhile, US corn export sales so far in 2016-17 of 19.3m
tonnes are "up 75% year on year", with consumption also firm from US ethanol plants,
whose output rose 12% year on year in the last three months of last year.
However, the forecast for prices longer-term, seen averaging
$3.75 a bushel in the October-to-December quarter of 2017, was below those
expected by investors.
Chicago's December futures contract was on Wednesday trading
at $3.91 a bushel.
"Prices remain somewhat capped by high stocks," Rabobank
said, highlighting too the potential for a dent to values from strong
production in Brazil including of the safrinha corn crop, the source of most of
the country's exports.
"We expect the area of safrinha corn to be up 4-5% year on
year and, assuming normal weather, a production of 56m tonnes is forecast,
versus 41m tonnes last year," on top of an increase of some 6-7% to 28m tonnes
in the summer corn crop too.
'Prices have found a
By contrast, Rabobank cut its forecast for quarter-average prices
of New York cocoa futures by up to $320 a tonne, following a decline which it
blamed on weakness in the euro – a key currency for West African producing
countries – and benign weather.
The dry Harmattan wind - which last year arrived in strength
in West Africa, hurting output – this season "looks very mild for the time
being, increasing the likelihood of very good mid-crops" in the region, which
produces the great majority of world cocoa beans.
However, futures, which have stabilised somewhat after
falling earlier this month to three-year lows, "seem to have found a bottom", the
bank said, forecasting that "lower prices should trigger higher consumption going
A 1% rise, year on year, over the past four weeks in US
chocolate confectionery sales "may be the first sign of improved demand in the
US on the back of lower prices", Rabobank said, forecasting prices closing the year
at some $2,340 a tonne, ahead of the $2,249 a tonne being priced in by December
Elsewhere in the soft commodities complex, Rabobank trimmed
its forecast for year-end prices of New York cotton futures by 1 cent to 71
cents a pound, flagging the prospect of US sowings of the fibre rising by some 5-6%
to some 10.5m acres, encouraged by improved prices.
And noting a tripling to 32,656, year on year, in March cotton
futures sold "on call" for pricing later, a sign that "buyer expectations of
lower prices are on the horizon", the bank said that a "peak in the cotton
futures rally doesn't seem far away".
However, the bank raised its forecasts for robusta coffee
futures by up to $140 a tonne, to $2,060 a tonne in the April-to-June quarter, citing
the potential for a boost should speculation prove true that Brazil is to
"If imports are actually allowed in the January-to-March
quarter, we estimate a jump of between $50 a tonne, if only Brazil robusta is allowed
to enter back into the country, and $80 a tonne, if Vietnamese coffee is also
But late 2017 will bring a retreat in prices of both robusta
and arabica futures, to $2,080 a tonne and 147 cents a pound respectively for
the October-to-December period, undermined by decent production prospects in
many countries, including Colombia, Peru and Honduras.