Cocoa is the best bet among crop commodities, with corn and
sugar posting the potential for gains too, said Rabobank, while saying it was "bearish"
on cotton, and on palm oil too despite lifting price expectations for the
The bank said it was "bullish on cocoa", sticking with price
forecasts for the beans above those that markets are pricing in, seeing New
York futures, for instance, average $2,030 a tonne in the first three months of
The March 2018 contract was on Wednesday trading at $1,980 a
The forecast reflected an expectation that recent price
weakness – and notably rumoured offer by Cote d'Ivoire of 750 CFA francs per
kilogramme for main crop beans for 2017-18, down from 1,100 CFA francs a year
before – "will have a significant detrimental effect on production".
The bank pegged 2017-18 cocoa output from Cote d'Ivoire, the
top producer, at 1.85m tonnes, below the record 2m tonnes reported for this season,
which ends on Saturday.
The production drop - which comes as stocks are easing in
the US, a major consuming country – "would have been significantly larger… if
the weather had not been as good" of late, Rabobank said.
Corn prices to rise?
For Chicago-traded corn too, the bank saw scope for price
gains, forecasting futures averaging $3.80 a bushel in the first three months
of 2018, ahead of the $3.63 ¼ a bushel the March contract was priced at.
The forecast reflected expectations that the US corn yield this
year will average 166-168 bushels per acre, a little below the 169.9 bushels
per acre expected by the US Department of Agriculture.
"High levels of variation" in yield reports from the early
harvest "lead us to believe US corn yields will be below the current USDA
forecast", the bank said, while seeing a dent to Brazilian sowings of the grain
from local prices which have dropped as much as 50% year on year.
At the equivalent of some $2.00 a bushel in Mato Grosso, the
main grower of second crop corn, "low prices will impact the planted acreage",
with combined main and second crop seedings seen down 2-3%.
For sugar, Rabobank forecast New York prices averaging 14.8
cents a pound in the first quarter of 2018, well ahead of the 13.97 cents a pound
that the March contract was trading at, citing the prospect of weaker values
prompting Brazilian mills to turn more cane into ethanol rather than sweetener.
Ethanol is also likely to be favoured by the onset of seasonally
wetter weather, which tends to favour output of the biofuel over sugar.
However, the bank was more neutral on prospects for prices
of coffee, seeing prices average 137 cents a pound in the last three months of
this year, ahead of market expectations, but fall below the futures curve from
the April-to-June quarter of 2018.
The market could, though, "be looking at significantly higher
price levels" if forecast rains do not materialise for Brazil, where dryness
has already caused a "dent in the potential" of the 2018 crop.
Wheat and soybeans also have a more neutral outlook, comparing price forecasts with futures curves.
And the bank said it was "bearish" over prospects for cotton
prices, curtailing to 800,000 bales its "worst case scenario" for US crop
damage from hurricanes Harvey and Irma, leaving the forecast harvest at 21m
Rabobank, seeing New York futures average 65 cents a pound
in the first three months of 2018, a little below the 67.72 cents a pound
suggested by the price of the March contract, also termed "optimistic" a USDA
estimate for US exports of 14.9m bales in 2017-18, with competition from India
likely to heat up.
The outlook for palm oil prices was also "bearish", as
inventories of the vegetable oil in top producers Indonesia and Malaysia "continue
to build up".
Meanwhile, demand from top importers India and China will
weaken as 2017 continues, undermined by relatively high prices and "seasonally
tepid" demand after the ending of current festival periods, including the
ongoing mid-Autumn holiday in China.
Although the bank raised its forecast for Kuala Lumpur palm
oil futures up by to 200 ringgit a tonne, estimates for values such as the
2,500 ringgit a tonne seen in the first quarter of 2018 remained comfortably
below the futures curve.