Rabobank ditched hopes of corn futures returning to $4 a
bushel any time soon, slashing its forecast for soybean values too, but
retained expectations of a revival in cotton and sugar prices, and upgraded its
coffee price outlook.
The bank cut by up to $0.57 a bushel its forecast for Chicago
corn futures, reducing to $3.50 a bushel the estimate for the nadir in prices -
in quarter-average terms - in the October-December period.
That implies some further downside for the December lot,
which stood at $3.64 a bushel on Monday, and would mark the weakest quarter
since the April-to-June period 2010 for Chicago corn futures, on a spot
The forecast assumes a record US corn yield of 170-175
bushels per acre, in line with the latest estimates on Friday from brokers
Doane, at 172.3 bushels per acre, and Linn Group, at 172.8 bushels per acre.
There is some talk that Informa Economics will update its estimate later on Monday.
The US Department of Agriculture currently pegs the yield at
165.3 bushels per acre, itself a record, but is expected on August 12, in its
monthly Wasde crop report, to lift the forecast.
Rabobank, which had forecast corn futures remaining above
$4.00 a bushel for the next year, cited for its yield forecast evidence that strong
second-quarter rainfall and low July temperatures bring bumper harvests.
"Years with above 11.5 inches of second-quarter accumulated
precipitation in Corn Belt states and average July temperatures below 72.5
degrees Fahrenheit tend to produce yields 12-15 bushels an acre above trend
yields," the bank said – criteria which 2014 meets.
Although the link "is not perfect, in three of the last four
years where these conditions held, yields exceeded the trend by 14-15 bushels
"While dryness in western Iowa may still cause production
concern over the next few months, overall crop condition still supports the
The forecast for soybean prices was cut by up to $1 a
bushel, meaning a market nadir expected in the October-to-December quarter at $10.20
That is below the $10.63 ¾ a bushel that November soybeans were
trading at on Monday, and would also represent the weakest quarterly
performance since the second quarter of 2010.
That said, there is still the prospect for some temporary
upturns in prices, with Rabobank cautioning that "prices may still see
weather-induced rally throughout the month of August", a key month for the crop
in the US, bringing the sensitive pod-setting period.
"Despite the optimistic forecasts, risks remain regarding
the realisation of the crop."
Sugar to sweeten
However, for sugar, although the bank cut by 1.0 cents a
pound to 17.2 cents a pound its forecast for average New York prices in the
current quarter, it stood by expectations of futures recovering to average 19.7
cents a pound in the first three months of 2015.
That is well above the 18.37 cents a pound that March 2015
futures are factoring, and would mark the best performance in more than two
"Physical offtake has emerged below the 17 cents a pound
mark," the bank said, noting the extent to which US regulatory data show users
covering demand ahead.
"Commercial participants have been increasing gross longs
over the month limiting, to a degree, the brunt of speculator selling
And although the reduced expectation of an El Nino has
reduced some of the threat to world production, "drier-than-normal conditions
continue to persist across cane growing regions of India, Thailand, Australia
'Much more competitive'
For cotton too, the bank forecast a recovery in prices, to
75.0 cents a pound by the April-to-June quarter, well above the 64.80 cents a
pound that May 2015 futures are factoring in.
Late in 2015, "a seasonal pick-up in physical offtake,
coupled with the lowest new crop prices of the fibre since 2008", reaching
61.90 cents a pound on Friday for October delivery, "are expected to stimulate
demand, providing price support.
"At current price levels, cotton is much more competitive
against man-made fibres," the bank said, noting too firm basis levels in the
exporting countries of the US and Australia.
However, the one commodity for which Rabobank raised
estimated was for coffee, lifting forecasts by up to 30 cents a pound to 190.0
a cents a pound from the October-to-December quarter half way through 2015.
"Uncertainty persists over the size of this season's
Brazilian crop, while cases of early flowering are compounding yield concerns
for next season," the bank said, while keeping its estimate for this year's
Brazilian crop at 47.5m bags, above expectations from the likes of Citigroup.