Societe Generale forecast rises ahead for soybean and
robusta coffee futures, even as it flagged the potential for benefiting from
short bets on arabica beans, while rating a sell on cotton as one of its top
The bank hiked by $0.85 a bushel to $10.50 a bushel its
forecast for Chicago soybean futures as of the October-to-December period, an
estimate well above the futures curve.
November futures were on Thursday trading at $9.97 ¾ a
The forecast reflected expectations of further growth in Chinese
imports of the oilseed in 2017-18, of 3m tonnes to a record 90m tonnes, fuelled
by demand from hog producers enjoying "higher profit margins".
Corn vs soybean
And this after a 2017 US soybean harvest which may not prove
as big as had been thought, with SocGen cutting its estimate for sowings this
year to 86.4m acres – below its previous figure of nearly 90m acres and the US Department
of Agriculture forecast of 88.0m acres.
Allendale this week pegged the figure at 88.825m acres,
while Informa Economics has pegged sowings at 88.02m acres.
"We expect weakness in soybean prices in the near term to impact
the US planting intentions," SocGen analyst Rajesh Singla said, seeing farmers
keep more area with corn, the major competitive crop in spring sowings
"Corn is now generating more profit than soybean at the
operating profit level and is almost at par on the net income level," Mr Singla
said, lifting his forecast for US corn sowings this year by 3.0m acres to 92.0m
acres, and trimming forecasts for year-end prices to $3.75 a bushel, a little
below the futures curve.
For London robusta coffee futures, SocGen introduced price
forecasts of $2,249 a tonne for the last three months of the year, rising to $2,315
a tonne in the January-to-March period of 2018.
That compares with the $2,223 a tonne at which November 2017
futures were trading at on Monday, and $2,213 a tonne being priced into the March
The bank's forecasts reflected a forecast that while robusta
coffee output in the top four producers – Vietnam, Brazil, Indonesia and India
- will recover by 6m bags in 2017-18, that will represent only a partial recovery
from the 10m-bag drop the current, weather-affected season.
SocGen forecast a robusta coffee output of 5.3m bags next
season, adding that Uganda, the fifth-ranked producer of the variety, "is still
suffering from the impact of severe drought and could further tighten the demand
and supply situation".
By contrast, for New York-traded arabica coffee, the bank cut
its price forecasts by up to 22 cents a pound, leaving its estimate for futures
in the last quarter of this year at 152 cents a pound, with the prospect for a
drop to 145 cents a pound early in 2018.
Indeed, while "neutral" over arabica price prospects for now
it said that the "the long end of the arabica coffee curve presents a shorting
opportunity" given the likelihood of an increase in Brazilian output next year.
Brazil sees alternate high and low years of arabica output,
with SocGen pegging the country's production in 2017, an "off" year, at 39m
bags - enough to support a world output surplus in the bean of 3.5m bags.
However, the bank's primary trading recommendation in crops
was to "sell rallies" in December cotton futures, terming "unsustainable" the rally
which has taken the contract 8.5% higher so far this year to 75.45 cents a
New York cotton futures are up 11.5% in 2017 on a spot
"Sales from state reserves in China, improvement in supply
from India and record production in Australia are likely to ease the tightness
in the cotton export market in the coming months," Mr Singla said.
"In addition, substantial improvement in farmers' profitability
is likely to restart cotton acreage expansion across the world," with higher
prices supporting spending on seeds and sprays which will "support yields in
2017-18 as well".
The bank, while raising its price forecasts for the fibre a
touch, termed cotton an "attractive short story", seeing futures average 70
cents a pound in the October-to-December period.