(Agrimoney) – Crops represent the worst bet among commodities, Goldman Sachs said, sticking with downbeat expectations for prices of grains, soybeans and cotton – although proving more upbeat on expectations for arabica coffee values.
The recent recovery in futures of many agricultural commodities has only set prices up for bigger falls ahead, the bank said, foreseeing values for the sector, excluding livestock, tumbling by 12.0% over the next 12 months.
The estimates imply 2015 turning out another negative year for ag investors, after declines of 9.3% in values last year, as measured by the agriculture sector of the S&P GSCI enhanced commodity index, and of 18.0% in 2013.
By contrast, the bank forecast some gains ahead for livestock ahead, of 6.0% over the next year, as well as headway for industrial metals and energy too.
‘High inventories’
Goldman stood by below-market forecasts for prices of all the main Chicago crops, including corn, for which it stood by ideas of spot futures standing at $3.75 a bushel in a year’s time.
That is 18% below the price that investors were factoring in on Wednesday, as measured by July 2016 futures.
While acknowledged “some sequential deterioration over the last few weeks” to US corn, and “risks to weather from overly wet weather”, the bank highlighted too “high” global inventories of the grain heading into 2015-16.
“We continue to expect high global carry-out stocks,” Goldman said, noting that latest weather forecasts “have been indicating cooler temperatures, which would be supportive of yields, for most of the key US states”.
‘More sowings’
For soybeans, the bank forecast prices holding at some $8.75 a bushel, some $1 a bushel below the futures curve on a 12-month horizon, also flagging the “favourable” US weather outlook, besides prospects for larger sowings in many major producing countries.
“Global acreage is very likely to be higher than last year, helping to keep production elevated globally,” Goldman said, adding that “we remain bearish for 2015-16”.
For New York-traded cotton, prices were seen at 60 cents a pound in a year’s time, compared with the 65.15 cents a pound at which July 2016 futures were trading, saying that values were likely to stay “relatively weak until more progress is made” in slashing huge global inventories.
And for sugar and, particularly, cocoa the bank stood by below-market price estimates too, noting a “well supplied” market of the former, and for the bean, that current elevated values will prompt “further demand destruction”.
El Nino worries
Goldman was, relatively, sanguine on expectations for wheat, seeing weather as a “key concern”, given the El Nino, which has a history of bringing dryness to some major producing regions, such as eastern Australia.
“Careful monitoring of global weather conditions will be required as the current El Niño episode progresses,” the bank said, while sticking “for now” with below-market forecasts for Chicago wheat prices of $5.30 a bushel over the next year.
The one crop where the bank was more upbeat than investors on prices was for New York-traded arabica coffee, in which it saw futures standing at 150 cents a pound over the next year.
New York arabica futures for December were trading at 128.20 cents a pound on Wednesday, with the July 2016 lots at 136.20 cents a pound.
Again Goldman cited weather setbacks, including El Nino and last year’s Brazilian drought, the “uncertain impact” of which was being reflected in futures’ sideways price moves over the past four months.
“While the next few months will show the outcome of last year’s weather, adverse weather on the back of El Niño, which is forecast to persist for the remainder of 2015, remains a risk for this year and next.
