Societe Generale recommended agricultural commodity bulls focus their attentions on arabica coffee as it slashed its forecast for grain and soybean prices, and rated new crop corn a sell.

The bank said that the fall in arabica coffee prices to amongst their lowest levels in three years represented a "buying opportunity" for New York's December contract, given the threat to production in Central America from an outbreak of roya fungus.

"Meanwhile, the latest production numbers from Colombia, through February, continue to show that the expected recovery this year is likely too optimistic."

"The global coffee surplus may turn out smaller than currently expected, resulting in a rebound in prices," SocGen said, forecasting prices averaging 160 cents a pound in the last three months of the year, above the 143.40 cents a pound at which the December contract was trading on Thursday.

Brazil support 'temporary'

However, Societe Generale, which has been one of the more bearish commentators on grain and oilseed prices, including ahead of the autumn slide in values, slashed further its estimate for futures in Chicago corn, soybeans and wheat.

Support to prices from Brazil's logistical problems will prove "temporary", SocGen analyst Christopher Narayanan said, warning investors "against chasing rallies", echoing downbeat comments from Macquarie on Wednesday.

"Logistical issues typically plague the start of the Brazilian harvest season and this year appears to be no different," he said.

"As the harvest progresses and picks up in speed, we expect these supplies to help replenish global inventories and take some pressure off US demand."

Bearish bet on corn

But the bank spared its most bearish comments for corn, recommending an outright short bet on Chicago's December contract, thanks to the prospects of a revival in US production this year from last year's drought-hit result.

"US drought conditions have shifted west and the latest 90-day outlook calls for some improvement in those areas as well."

As for demand, with margins for US hog and cattle producers "still trending on either side of zero", any rise in feed demand "could quickly reverse if corn prices rise too far".

The bank slashed by $1.57 a bushel to $5.00 a bushel its forecast for corn prices in the October-to-December quarter, well below the $5.66 a bushel at which the December contract was trading on Thursday.

'Discount to erode'

SocGen cut its forecasts for Chicago wheat prices too, by up to $1.48 a bushel, but forecast outperformance nonetheless against corn.

But the grain's unusual discount against corn would encourage use by ethanol plants and livestock feeders.

"As with corn, we expect a decline in wheat prices as 2013 progresses into year-end,"

"However, with the prospect of late-season exports and the substitution effect, we expect wheat's discount to corn to slowly erode as the year progresses," Mr Narayanan said.