Agricultural commodities including soybeans and corn, the worst-performing commodity this year, probably will extend declines in 2014 as world supplies remain ample, Rabobank International said in its annual outlook report.
The world is entering a period of “more balanced” supply and demand fundamentals after a decade of increasing volatility that drove prices for many farm goods to records, Rabobank analysts led by Luke Chandler in Sydney, said in the e-mailed report today. Increased planting of grains and oilseeds and a potential slowdown in crop use for biofuels mean prices for corn and soybeans will trend lower next year, he wrote.
“Global inventory levels have been rebuilding throughout 2013, and the rapid demand growth of recent seasons has slowed,” Chandler wrote. “We expect prices to continue to ease for most markets in the grain and oilseeds complex in 2014.”
Corn, the biggest loser this year among the Standard & Poor’s GSCI gauge of 24 raw materials, tumbled 38 percent since Jan. 1 as the U.S. harvest, the world’s biggest, rebounded from drought in 2012. Wheat slid 19 percent on the Chicago Board of Trade, while soybeans dropped 6.9 percent. The U.S. Department of Agriculture expects global production of all three crops will rise to records in the 2013-14 season.
Corn may average as low as $4.10 a bushel in the fourth quarter of next year, while soybeans slide to $10.70 a bushel, Rabobank said. That compares with prices today at $4.315 a bushel and $13.125 a bushel, respectively.
The bank forecast wheat at an average $6.40 a bushel in the second, third and fourth quarters. That compares with today’s price of $6.295 a bushel for the March contract, currently the most actively traded, and $6.6125 a bushel for futures expiring in December 2014. Rabobank maintains a neutral outlook on wheat, saying that the market is “delicately balanced” while ample corn supplies may still reduce demand for the grain.
Cotton may average as low as 73 cents a pound in the fourth quarter, compared with prices now at 83.23 cents on ICE Futures U.S. in New York. Farmers globally will boost planting in 2014-15 by 3 percent to 33.3 million hectares (82.3 million acres), boosting production to 120 million bales. A bale weighs 480 pounds (218 kilograms).
Arabica coffee may average as low as 90 cents a pound in the third quarter, Rabobank said, down from current prices of $1.1255 a pound in New York. Robusta coffee in London may drop to $1,400 a metric ton in the same quarter. That compares with today’s price of $1,775 a ton on NYSE Liffe. Ample supplies of both varieties will pressure prices.
Some agricultural commodities will still increase next year, Rabobank said. Raw sugar may average as high as 18.8 cents a pound by the fourth quarter of 2014, the bank estimates, compared with current prices at 16.27 cents a pound in New York. The market may move into a supply deficit in 2014-15, capping inventories for the first time in four seasons, while weakening currencies in producing countries may encourage farmer selling and limit price gains, according to the report.
Cocoa may climb as high as $3,050 a ton on average in the fourth quarter, compared with prices today at $2,782 in New York. The bank expects inventories to shrink as consumption outpaces production.
Declining inventories may support palm oil next year, with prices averaging as high as 2,625 Malaysian ringgit ($811) in the second quarter. That compares with today’s price of 2,562 ringgit on Bursa Malaysia Derivatives. Inventories in Malaysia, the second-biggest producer, after Indonesia, will stay below 2 million tons through the end of 2013, compared with 2.5 million tons last year, and stockpiles probably will decline further in the first quarter of next year. The bank pegs global production in 2013-14 at 57.9 million tons, up 4.7 percent.
“Overall oilseed markets will remain bearish, limiting the upside in palm oil,” Chandler wrote. Production of all major oilseeds may climb to 484 million tons, in 2013-14, up 5.4 percent from a year earlier, according to the report.