(Agrimoney) – Commerzbank stood by upbeat expectations for corn and wheat futures, but cut its forecasts for soybean prices to well below levels investors are factoring in, citing a “very relaxed supply situation”.
The bank stuck with a forecast that Chicago corn futures will return to $4.00 a bushel by the end of 2015 – an outcome that investors are not pricing in until July next year – forecasting a better-than-expected start to next year for values too.
Crop estimates suggest that “global production in 2015-16 will be outpaced by demand”, a factor which “should give the corn price a lift”, the bank said, highlighting the threat to output in some countries from the El Nino weather pattern.
“The El Niño weather phenomenon does create some uncertainly on the corn market,” the bank said, noting some “cautious” outlooks for the harvest in China, the second-ranked producing country.
“Weather services are saying that an El Niño phenomenon for China means a higher likelihood of a hot and dry summer.”
‘Very good conditions needed’
For wheat, Commerzbank held with expectations that Chicago wheat futures will average $5.50 a bushel in the October-to-December quarter, above the $5.33 a bushel at which December futures were trading at on Wednesday.
The bank flagged weather setbacks to crops in a number of producers, including the European Union and the US, besides the prospect of weaker output than last year in Russia and Ukraine.
“Very good conditions are needed in key regions” to ensure that the world does not fall into a production deficit in 2015-16.
Paris wheat futures face a rise too, to average E200 a tonne in the October-to-December quarter compared with a current price of E185.00 a tonne for December futures.
Besides world wheat setbacks “the fact that the euro is likely to drop further versus the dollar should also result in a moderate rise of the price in Paris”, Commerzbank said.
Soybean downgrade
However, on soybeans, the bank was notably more downbeat on prices than investors, cutting its forecast for futures at the close of 2015 by $0.50 a bushel to $9.00 a bushel, and downgrading price hopes for next year too.
The market is forecasting soybean prices at $9.61 a bushel in early 2016.
Commerzbank highlighted the boost to world soybean supplies from record 2014-15 harvests, and the prospect that 2015-16 output will be only “marginally lower”.
Even if Midwest wetness has prevented US farmers from expanding sowings of the oilseed “by anywhere near as much as had been expected for some months, the supply situation for soybeans will remain very relaxed over the coming months, making a strong price recovery unlikely”.
‘Price trend quite different’
For rival oilseed rapeseed, the bank highlighted that the “price trend is quite different”, with values gaining support from the prospect of a weaker harvest in the European Union, the top producer, and with weather hitting expectations for output in Canada, the biggest exporter.
“Global rapeseed production is therefore estimated to decrease by 4% in 2015-16,” Commerzbank said.
“The global stock-to-use ratio,” a key metric for estimating prices, “is already low, at 10%, and should now drop further to 8%, and even lower in the EU.”
However, with prices already having rallied strongly, Commerzbank’s forecast of Paris rapeseed futures averaging E355 a tonne in the October-to-December quarter was a little below the futures curve.
