(Agrimoney) – 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 said.
Unica hurdle
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.”
