Rabobank upgraded forecasts for grain prices, and ditched expectations
of below-$12-a-bushel soybeans, but remained downbeat on prospects, and was
cautious on coffee futures too.
The bank said that a continuation of the "heightened
volatility" evident in agricultural commodity markets in recent weeks - thanks
to weather setbacks in Brazil and the US, and the Ukraine crisis – was "not out
of the question".
"These weather and geopolitical uncertainties look likely to
persist – or even exacerbate, with the probably development of El Nino, and
increasing instability driven by BRIC countries," an acronym for Brazil, Russia,
India and China.
However, these factors, for many crops, appear merely to
have delayed a decline to much lower prices to the end of the year or early
'Price rallies difficult
For corn, although Rabobank lifted its forecast for Chicago prices
in the April-to-June quarter by $0.40 a bushel to $5.00 a bushel, a little
below current levels, it maintained ideas of a sharp fall ahead.
Corn prices will average $4.10 a bushel in the first quarter
of next year, the bank said, well below the $5.19 1/2 a bushel that March 2015 futures
were trading at on Wednesday.
"In the absence of severe disruptions to planting or
pollination, price rallies will be difficult to sustain in the short-term," the
bank said, foreseeing "sideway price movement" for now.
Looking further ahead, it forecast that US corn sowings will
exceed the current US Department of Agriculture estimate of 91.7m acres by "at
least" 500,000 acres, terming the current pace of planting, while delayed, "normal
relative to the last five years".
The USDA reported US corn sowings as of Sunday at 19%
complete, behind the average of 28%, but well ahead of the 5% completed a of
the same time in last year's particularly slow planting season.
For wheat, the bank hiked its forecast for average Chicago futures
prices this quarter by $1.10 a bushel to $7.00 a bushel, citing the dryness besetting
the US winter wheat crop, and political instability in the former Soviet Union.
However, the prospect of a rise in world stocks of the grain
over 2013-14 is "expected to have more weight" as exports begin "to trade more
freely" with the improved North American weather, Rabobank said, sticking with a
price forecast of $5.60 a bushel for the October-to-December quarter.
And the bank - while lifting its forecast for soybean
futures for the current and July-to-September quarters by more than $2 a bushel
above$14 a bushel, saying the US "will not be able to import enough" to bolster
it meagre supplies – forecast futures tumbling to $12 a bushel in the October-to-December period.
That implies a drop deeper than that being factored in by
futures, with Chicago's January 2015 contract trading at $12.52 1/2 a bushel.
'Timing is everything'
Arabica coffee futures will also retreat, Rabobank said,
lifting its forecast for prices in the current quarter by 20 cents a pound, but
to 190 cents a pound below the futures curve.
Values will enter 2015 at about 170 cents a pound, below the
218.45 cents a pound being factored in by New York's January 2015 contract on
Still, the bank highlighted the timing of the El Nino
weather pattern, seen by meteorologists as a probability for this year – and which
typically bring excessive rains to Brazil, the top coffee producing country - as
having a big influence.
"If an El Nino starts
in July as forecast, it is likely to bring above-average rainfall to Brazil's
arabica and conillon [robusta] crops during the second half of 2014, improving
the prospects for the 2015 crop and potentially topping up reservoirs
"However, timing is everything, and excessive rain over the
next few months would be expected to drive quantity and quality downgrades [to
the 2014 harvest]."
Meanwhile, the El Nino, linked to warm and dry weather in
Asia, could "accelerate the harvests" in Indonesia and Vietnam, key producing
countries for robusta coffee, "whilst potentially paring back yields for this
season and the next".