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Corn, soy prices near the bottom. Cotton, sugar to revive

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Corn and soybean futures will "experience further downside" – but not too much - Rabobank said, while foreseeing revivals ahead in cotton and sugar futures.

The bank acknowledged the prospect of huge US harvests of both corn and soybeans, estimating the yield of the grain at 170-175 bushels per acre, above a US Department of Agriculture forecast of 167.4 bushels per acre.

For soybeans, if pegged the yield at 46.5 bushels per acre, and harvest at 3.985bn bushels, compared with USDA forecasts of 45.4 bushels per acre and 3.816bn bushels.

"As the record large US grains and oilseeds harvest progresses, conditions remain idea to realise the long-anticipated build in stocks," the bank said.

"Grain and oilseed prices are expected to experience further downside through 2014 as the new crops flow."

Above the curve

However, while cutting its forecast for average soybean futures prices in the October-to-December quarter by $0.20 a bushel to $10.00 a bushel, that remains above expectations among many observers for single-digit prices ahead.

Values retain some premium to account for the risk of an early frost, which remains a threat for the next couple of weeks, and are seen typically finding a seasonal bottom later in the autumn, under the weight of harvest supplies.

And Rabobank was marginally more upbeat than investors on the prospects for a post-harvest rebound in prices, seeing them average $10.60 a bushel in the first three months of 2015 and $10.75 a bushel in the April-to-June period, both figures above the futures curve.

For corn, the bank stuck with a forecast for prices to average $3.50 a bushel in the October-to-December period, reviving to $3.90 a bushel in the April-to-June period of 2015.

Last week, Bill Tierney, at Chicago-based AgResource, forecast corn prices averaging $3.40 a bushel this season, before falling below $3 a bushel from 2015-16 to 2019-20.

Sugar recovery

For sugar, Rabobank cut it price forecast for New York futures by up to 1.0 cent a pound, reducing its estimate for values in the October-to-December quarter to 17.5 cents a pound.

"Physical off-take remains tepid," contrasting with "heavy" near-term supplies, the bank said.

However, heading into 2015, its price forecasts remained above the futures curve, amid concerns over the viability of prices remaining at levels which have "traded below the cost of production for the last two years", at "unsustainable levels".

"The lack of area expansion and declining agricultural yields across key producers will continue to drive a tightening of the supply and demand balance in the upcoming seasons, as consumption growth outstrips that of production, supporting the longer term price outlook."

'Resurgence in physical demand'

In cotton too, Rabobank forecast a revival in prices beyond that investors are factoring in, highlighting that a tumble in prices since mid-June "has attracted a considerable resurgence in physical demand".

Inventories of old-crop cotton, outside China, "remain tight, and commercial participants have taken advantage of" the lower prices to purchase supplies.

And even in China, the bank forecast a "pick-up in domestic mill demand throughout 2014" as the state stops auctions from its huge state reserves,

The forecast for Chinese cotton imports in 2014-15 was upgraded to 10m bales, while the forecast for US production this year was maintained at 16.9m bales, below a USDA forecast for 17.5m bales, reflecting continued dryness in Texas, the top growing state.


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