(Agrimoney) – Corn prices could see some buoyancy, and cotton values too, but prospects are not as strong for a revival in wheat futures, Societe Generale said.
The bank, commenting on the US Department of Agriculture’s release last week of its first full estimates for US crop balance sheets in 2015-16, assessed the estimate for year-end corn stocks as significantly too generous.
SocGen forecast US corn stocks ending next season at 1.56bn bushels, some 126m bushels below the USDA estimate.
The bank’s forecast reflected higher estimates for domestic use of corn in both animal feed and ethanol production.
“We expect steady gasoline demand year on year in 2015, helping to support the need for ethanol as the only commercially and economically viable oxygenate to meet the Clean Air Act standards,” SocGen analyst Christopher Narayanan said.
‘Prices will remain supported’
On exports too, the bank was more generous than the USDA, saying that “while the rising dollar could hurt US exports, a smaller-than-expected safrinha corn production from Brazil is likely to support the US export programme”.
Brazil’s safrinha corn crop, for which the ideal sowing window closed at the weekend, is seen suffering its first drop in plantings in seven years this year, thanks to weaker prices.
SocGen said that its forecast of a “small reduction” in US corn inventories over 2015-16 suggested “that prices will likely remain supported at current levels, if not a bit higher”.
Corn futures for May, the best-traded contract, on Tuesday stood 1.4% higher at $3.92 a bushel in morning deals in Chicago.
‘Bit more optimistic’
The bank said that it was moderately bullish over cotton price prospects too, proving more upbeat on US export prospects for the fibre both this season and in 2015-16.
“We are a bit more optimistic than the USDA on the demand side of the balance,” Mr Narayanan said, after a period of strong data on weekly US cotton export sales, until a downturn this month.
SocGen forecast US cotton stocks ending next season at 4.08m bales, some 225,000 bales smaller than the USDA forecast.
‘Muted prices’
However, on wheat, the bank said that evidence of rising exports was needed to revive prices – and signalled that an improvement in volumes may not come until next season, with 2014-15 shipments pegged at 865m bushels, 35m bushels below the USDA forecast.
“We expect to see wheat prices to remain muted until a significant uptick in US exports is seen,” Mr Narayan said, foreseeing shipments in 2015-16 hit 2.03bn bushels, 48m bushels more than the USDA is predicting.
Weaker prices looked set to depress plantings of spring wheat, excluding durum, with SocGen forecasting total US wheat sowings for the 2015 harvest at 55.0m acres, 500,000 acres below the USDA guess.
“The continued pressure on wheat prices owing to ample global inventories have helped to reduce the expected returns for this crop.”
