Banks turn more upbeat on hopes for ag prices

23.04.2018

Analysts have turned more upbeat on price prospects for agricultural commodities, seeing prospects for further gains in the likes of corn, and for rebounds in coffee and sugar futures.

Commentators monitored by FocusEconomics, and including the likes of Commerbank, JP Morgan and Societe Generale, have over the past month raised by 2.1 points to 16.5% their forecast for agricultural commodity price gains in the year to the October-to-December quarter.

The upgrade reflected improved expectations for a range of contracts, including the likes of corn, cocoa and cotton.

Indeed, of the eight contracts followed by FocusEconomics, only one – sugar – received a downgrade, with the consensus forecast for average New York futures values in the October-to-December period lowered by 0.7 cents a pound to 14.6 cents a pound.

Even so, this remains well above the futures curve, with New York’s October raw sugar contract closing on Thursday at 12.19 cents a pound, and the March 2019 lot at 13.38 cents a pound.

“Excess global production and large stocks should keep prices low in coming months, although a higher share of ethanol production from Brazilian sugar mills could help reabsorb oversupply,” FocusEconomics said.

‘Prices should rise’

Analysts also remain upbeat on prospects for Chicago corn prices, for which they raised their forecast for average values in the last quarter of 2018 by $0.09 a bushel from last month to $4.18 a bushel.

That compares with the $4.08 a bushel at which December futures closed on Thursday.

“Looking ahead, prices should rise, thanks to greater demand for food, feed and industrial usages. Brazil will see particularly strong demand growth due to a burgeoning ethanol industry,” FocusEconomics said.

And for arabica coffee, analysts forecast prices in the October-to-December period at 135 cents a pound, sticking broadly by expectations issued last month, and well above the 121.90 cents a pound priced in to New York’s December contract.

“Over the medium term, greater supply should be met with stronger demand.”

‘Stronger global demand’

By contrast, for cotton, analysts lifted their price forecast, by nearly 4 cents a pound to 78.6 cents a pound, but to a level which left them in line with the futures curve, ending a long period of bearishness over values of the fibre.

New York December futures closed on Thursday at 78.59 cents a pound.

“Asian economies will drive stronger global demand for cotton this year, which should roughly match global supply,” FocusEconomics said.

“Optimistic medium-term supply estimates are, however, keeping a lid on prices.”

The largest upgrade month on month was afforded to cocoa, in which the consensus forecast for New York’s average price in the October-to-December period soared by $178 per tonne to $2,337 per tonne.

Still, that remains well below the futures curve, with the December contract closing the last session at $2,813 a tonne, helped by better-than-expected European grind data earlier this week for the January-to-March period.

“Prices are set to dip going forward as supply should continue to exceed demand this cocoa season, according to the International Cocoa Organization’s latest projections,” FocusEconomics said.

Wheat price outlook

And, among grains, analysts remain notably cautious on prospects for wheat prices, standing by a forecast for Chicago average values of $5.09 a bushel in the last three months of 2018.

December futures closed on Thursday in Chicago at $5.32 ¼ a bushel.

While highlighting growing world wheat demand “due to greater feed and residual usage”, FocusEconomics also flagged a “solid” export performance by Russia, and Argentina’s enhanced supplies too.


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