Rabobank offered little consolation for wheat growers,
cutting its price forecast even as futures hit a six-year low - but a downgrade
to expectations for cotton prices left more hope for bulls.
The bank slashed by up to $0.35 a bushel its forecast for
Chicago wheat prices, on a quarter-average basis, ditching expectations of
prices returning above $5.00 a bushel for at least a year.
Rabobank, which also trimmed its forecasts for Paris wheat
futures by up to E15 a tonne, cited strong harvests and bitter rivalry on
export markets which are leading to "massive stockbuilding" of the grain in
both the European Union and the US.
"Ferocious competition abroad is dragging global wheat
prices lower, as weak currencies have provided Black Sea and Argentinian
exporters with a tremendous competitive advantage."
The uncertainty of ergot contamination specifications which
kept Egypt, the top wheat importer, out of the market for much of this month
only enhanced the bearish pressure.
"In a global market where export countries are aggressively
looking for destinations for their wheat, such a slowdown of imports pushed
Six-year price low
As an extra weight on values, northern hemisphere winter
wheat crops have "made it through winter without any unusually high winter
damage, and are encouraging expectations for the 2016 harvest", the bank said.
The comments came even as wheat futures tumbled, falling
below $4.50 a bushel in Chicago, the world's benchmark market, for the first
time since 2010 on a spot contract basis.
In Paris, the best-traded May lot touched a contract low of
E156.25 a tonne.
Rabobank forecast Chicago prices ending the year at about
$4.75 a bushel, below the $4.92 a bushel that December futures closed at on
Monday, with the E170-a-tonne estimate for Paris futures at the end of 2016 close
to the level that investors are pricing in.
'Due an upward
The bank also reduced its forecast for New York-traded cotton
futures, by up to $0.02 a pound, cautioning that the talk of China selling down
its huge stocks "has sent bearish sentiment through the market".
However, its forecasts remained comfortably above the
futures curve, with an estimate, for example of prices of about 67 cents a
pound at year-end above the 58.19 cents a pound priced in by the December
"Cotton futures are oversold, and due for a small upward
correction," Rabobank said, if cautioning that upward movement may not be
forthcoming until after the completion of US sowings - which the bank forecast easing
marginally year on year, rather than increasing as most commentators expect.
The US Department of Agriculture, for instance, in outline
forecasts which will be updated later this week, has forecast a 1.1m-acre rise
to 9.5m acres in domestic cotton plantings this year.
The bank also said that an "improvement in US [export] sales
data, and an increase in physical transactions, suggest that weaker cotton prices
have been stimulating demand", which has proven "lacklustre".
Rabobank kept expectations for futures in other crops
largely unchanged – which for corn represented a somewhat bearish take, with
the forecast for year-end prices kept at $3.70 a bushel, below the price that
investors are pricing in.
December futures closed on Monday at $3.86 a bushel.
The bank flagged a "lacklustre US export pace, larger expected
corn crops in South America, improved outputs in Europe, and a sufficient
forecasted acreage and production in the US," where is estimated plantings
rising by some 1m acres for 2016-17, enough to keep stocks ticking higher.
For soybeans, the estimate for prices around the end of 2016
was trimmed by $0.05 to $8.80 a bushel, in line with the $8.80 ¾ a bushel at
which November futures were priced.
Although "soybean fundamentals remain bearish… futures have
gained support from outside factors", notably recovery in crude oil and palm
oil prices, to which the soy complex is linked through soyoil, a feedstock for biodiesel
plants and rival to soy.