(Agrimoney) – Crop futures have, largely, reached the bottom – but that does not mean a rebound is forthcoming for most contracts in 2016, Rabobank said, rating cotton and sugar among best bets in ags, and cocoa as the worst.
Prospects for most agricultural commodity markets are “showing considerably more risk to the upside than the downside from current levels,” after falls reflecting a strong dollar as well as the building of “very high, or even record” stocks of many crops, Rabobank said.
A strong dollar cuts the affordability of dollar-denominated exports, such as many ags, to buyers in other currencies.
Ag prices appear to have “turned the corner” in the July-to-September quarter, which witnessed multi-year lows in measures such as the S&P agri index and the United Nations Food and Agriculture Organization food price index.
‘Particularly acute weather risks’
However, “as we progress into 2016, agri commodity stocks remain comfortable and are expected to limit price gains to modest levels throughout the year” for the complex as a whole.
Exceptions include New York-traded raw sugar futures, which the bank forecast extending their recent recovery to average 15.5 cents a pound in the last three months of 2016, well above the 14.17 cents a pound at which October 2016 futures were trading at on Monday.
Values will be supported by a world production shortfall of 4.7m tonnes the bank forecast for 2015-16, and against the background of an El Nino which is causing “particularly acute…. weather risks” for the market, having already caused undue dryness in many Asian cane-growing countries.
For cotton too, the bank was upbeat, seeing New York futures recover to 70 cents a pound by the July-to-September quarter, ahead of the 64.36 cents a pound being priced in by the October 2016 contract.
The forecast reflects an expectation that “oversupplied world cotton stocks become moderately more manageable” as weak prices prompt a further decline in world sowings of 2016-17 – of 12%, raising the potential for a 15m-bale global production shortfall.
