Crops will prove among the better performers of a somewhat muted commodities sector next year, analysts believe, although proving cautious over prospects for coffee and wheat prices.
Prices of commodities overall are expected to gain 0.7% year on year, according to a FocusEconomics consensus derived from forecasts from a range of commentators, including ABN Amro, Commerzbank and JP Morgan.
However, “solid increases in prices for base metals and agricultural products will spearhead the uptick,” the group said, with values of energy and precious metals “seen rising only marginally next year”.
Prices of the 10 agricultural commodities covered, ranging from corn to wool, were forecast gaining 2.8% - as measured by the average of spot prices in the last three months of 2020, compared with the same period of this year – compared with a 2.9% figure for base metals.
‘Prices look set to rise’
FocusEconomics said that “robust demand for animal feed and rising feedstock production for biofuels, coupled with ongoing supply concerns, are set to support agricultural prices next year”.
It added that “our panellists expect price growth to slow further ahead and see agricultural prices rising 1.7% in annual terms in the fourth quarter of 2021”.
Corn was among the list of expected 2020 gainers, with prices expected to average $4.03 a bushel in the fourth quarter of next year, above a spot price on Wednesday of $3.72 ½ a bushel, and the $3.92 ¾ a bushel that investors were factoring in to the December 2020 lot.
“Prices look set to rise next year as end stocks are seen dropping, while demand is set to remain relatively strong,” FocusEconomics said.
‘Easing of tensions’
Chicago soybean futures were also on the list of gainers, seen averaging $9.50 a bushel in the last three months of next year, compared with a spot price of $8.77 ½ a bushel, and the $9.29 ½ a bushel price into the November 2020 contract.
“Our panellists expect soybean prices to increase in the coming months, likely in part on expectations of progress in US-China trade talks.
“A potential easing of tensions related to the US-China trade war could boost demand.”
And for New York cotton, commentators forecast prices averaging 69.1 cents a pound in the fourth quarter of next year, above a spot price of 63.10 cents a pound, and the 67.08 cents a pound the December 2020 contract was trading at.
“Prices will likely increase slightly from current levels due to healthy demand in China,” the analysis group said, although adding that “subdued global growth, partly due to trade protectionism, and ample US supply pose downside risks to prices”.
‘Abating supply concerns’
Commentators are less sanguine on New York raw sugar, seeing prices at 13.2 cents a pound in the last three months of next year, above the 12.96 cents a pound the spot March lot is valued out, but a little below the futures curve for late 2020.
FocusEconomics noted support for values for the sweetener nonetheless from “weak production in the US and Thailand”.
And for cocoa, a forecast for New York futures averaging $2,436 a tonne late next year was a little below the $2,499 a tonne being priced into December 2020 futures, although above the current spot price of $2,387 a tonne.
“Prices are expected to moderate, due to strong production in Cote d’Ivoire and abating supply concerns in Ghana.”
However, arabica coffee was the least favoured among softs, with analysts seeing the New York spot price in the October-to-December period of 2020 averaging 115 cents a pound - below the spot value of 123.20 cents a pound, and the 131.10 cents a pound priced in to the December 2020 lot.
Prices will “remain anaemic by recent historical standards due to the supply glut”, although with the potential for support from “lower yield projections and strong demand from Asia”.
Among grains, Chicago wheat was seen trading at $5.00 a bushel late next year, below a spot price of $5.33 ½ a bushel and the $5.49 ½ a bushel the December 2020 contract is trading at.
“Prices are expected to decline going forward, as increased supply should exert downward pressure.”