ABN Amro forecast that the worst is over for the tumble in
grain prices, and forecast a rise in sugar futures ahead despite the potential
for a setback when fresh Brazil estimates are unveiled later this month.
The bank, in a quarterly update, forecast that Chicago corn
and wheat futures will post their lowest average prices in 2014, at $4.00 a bushel
and $5.50 a bushel respectively, weighed by strong world production prospects.
However, that implies only small limited declines in wheat
futures to $5.25 a bushel as of the end of October, some 6% below the price of December
futures on Friday.
For corn, the forecast price of $3.75 a bushel as of three
months' time is a little above where corn futures were trading at on Friday.
And ABN Amro was upbeat over soybeans too, seeing prices
hitting $11.50 a bushel on that timescale, some 9% above where Chicago's November
futures contract was trading.
The bank cited the "diminished odds" of an El Nino weather
pattern, which is typically positive for world soybean production, raising it
typically by more than 3%.
Cocoa and coffee
Among soft commodities, the bank saw cocoa and arabica coffee
futures curves close to existing levels, with arabica "to remain rangebound"
while investors get a better idea of the size of the ongoing Brazilian harvest,
the world's biggest, and flowering ahead of the 2015 crop.
However, robusta coffee will nudge higher to $2,100 a tonne
on a three-month timescale, ABN Amro said, noting "strong demand" for the bean,
although with an "excellent" Vietnamese harvest having created a "well balanced"
market, ABN analyst Hans van Cleef said.
And the bank forecast New York sugar futures returning to
19.00 cents a pound by the end of October for the first time, for a spot
contract, in a year, against a backdrop of dryness concerns for cane crops in
Brazil and India, the top two producing nations.
If an El Nino does emerge, and brings further dryness to
Brazil, "it could result in even lower [cane] yields next season", Mr van Cleef
One potential stumbling block could be a revision in the offing
by cane industry group Unica to its forecast for the Centre South cane crop, which
could trigger buy the rumour, sell the fact movement in futures.
"With the market
fearing the worst concerning the Brazilian sugar crop, any positive surprises
could result in profit-taking," Mr van Cleef said.
"This, combined with uncertainties about next year's crop,
could keep future prices around the current level."