(Agrimoney) – Commerzbank cut its hopes for wheat prices but, kept its forecasts above the futures curve, citing support to the market from corn, and assessing a benchmark estimate as “too optimistic”.
The bank cut its expectations for wheat futures in Chicago by up to $0.50 a bushel, and in Paris by up to E25 a tonne, citing the improved forecasts for crops in many producing countries.
“The world picture seems to have changed completely,” Commerzbank said, noting widespread upgrades to world crop hopes since early August, and the impact of a strengthened dollar, which makes dollar-denominated exports, such as many commodities, less competitive.
“The 2015-16 season should produce a surplus, which would be the third successive one and quite substantial.”
‘Still some clouds’
Nonetheless, the bank said that there were “still some clouds on the horizon” for wheat output, including renewed dryness in Australia, which has raised questions over some of the more optimistic crop forecasts of late, some above 27m tonnes.
Indeed, the US Department of Agriculture – which earlier this month raised by 5.1m tonnes, to 731.6m tonnes, in its forecast for world wheat output in 2015-16 – was being “too optimistic”.
This was “not least” the case for the European Union, for which the USDA, whose data set market benchmarks, has forecast a 154.1m-tonne harvest, well above the 148.6m tonnes which the European Commission itself is forecasting.
Commerzbank kept its forecasts for wheat futures a little above the futures curve, seeing them average $5.20 a bushel in Chicago in the first three months of next year, compared with the $5.01 a bushel that March 2016 futures were trading at on Tuesday.
For Paris prices, the forecast of E180 a tonne for the January-to-March period was also a little above the futures curve.
‘Rather more critical picture’
Furthermore, wheat markets will gain support from fellow grain corn, for which Commerzbank stuck by expectations for prices averaging $4.00 a bushel in the October-to-December period, and recovering to $4.50 a bushel in a year’s time.
Chicago futures for December 2015 were trading at $3.82 ¼ a bushel on Tuesday, while the September 2016 contract was priced at $4.01 ¾ a bushel.
The bank flagged a “rather more critical picture” for world production prospects for the grain, with the USDA this month cutting its forecast for global output by 7.5m tonnes to 978.1m tonnes.
Besides a downgrade this month by the USDA to its estimate for the domestic yield, expectations have also waned, thanks to heat and dryness, for production in Ukraine and the European Union.
The stocks-to-use ratio, a major pricing metric, for world corn supplies “is now likely to fall again a little”, Commerzbank said.
‘Over-optimistic’
The bank was also somewhat upbeat over oilseed price prospects, despite trimming its forecast for Chicago soybean futures in the first three months of next year by $0.25 a bushel to $9.25 a bushel.
This price remains above the $8.77 ¼ a bushel at which March 2016 futures were trading at.
“Many observers see the USDA soybean estimate for the US as over-optimistic, with yield estimates too high, and liable to correction,” Commerzbank said.
Price upgrade
For Paris rapeseed, price forecasts for both the October-to-December 2015 period and the first quarter of 2016 were nudged higher by E10 a tonne to E365 a tonne and E370 a tonne respectively, keeping them a little ahead of the futures curve.
“The rapeseed balance is far less healthy in both the EU and worldwide than that for soybeans,” the bank said, flagging the impact of dry weather in reducing harvests in the EU, the top producer and consumer, and Canada, the biggest exporter.
“The global stocks-to-use ratio is expected to hit a 12-year low of 6%.
“Rapeseed should at least be able to defend its price lead” over soybeans.
