Home > Agri prices spike on weather and politics, again

Agri prices spike on weather and politics, again

Supplier News

The Rabobank Agri Commodities Monthly report for March 2014 indicates that risk premiums have returned to the agri-commodity markets.

The S&P Agri Index has rallied near 20% since late January, the most since mid-2012, as geopolitics and unfavourable weather drive volatility across the agri-commodity markets once again.

Grains and oilseeds

Wheat

The report holds a bearish view on wheat markets throughout the 2014/15 season despite the recent rally, with Rabobank expecting an average of USD 5.90/bu for Q2 2014 CBOT wheat prices barring any trade disruptions in the Black Sea region. Favourable crop conditions throughout the Black Sea region and the EU continue to support Rabobank’s view of modest gains to stocks for major wheat exporters for the 2014/15 season.

Corn

The unrest in the Black Sea region indicates a bearish outlook for corn in the long term, as grain flow has not yet been materially impacted. Although US corn planting will be down, the expected 93 million acres in the 31 March Prospective Plantings report will be neutral to prices. Strong US export sales at 92.5 percent of the USDA’s projection remain tenuous while local selling is beginning to impact price.

Soybeans

Rabobank’s price forecast for soybeans is slightly lower for Q2 based on slowdown in Chinese purchases. Brazilian crop downgraded slightly but is still at record high, with exports flowing at a greater pace than expected. Chinese orders have however been cancelled and the rate of purchases is likely to slow, while large US soybean plantings maintain bearish view into the second half of the year.

Palm Oil

Palm oil price outlook is raised on dry weather conditions, with lower stocks supportive of prices. Risk of demand erosion persists due to higher palm oil price, and the El Niño occurrence could lead to further strengthening of prices.

Softs

Sugar

The weather risk premium supports raw sugar prices but exportable stocks remain high. Weather risk will persist in the short and long term, with a potential El Niño occurrence. However, exportable supplies will limit weather-related rallies, and large net long speculative position will continue to drive volatility. 

Coffee

Coffee prices remain elevated despite speculative profit taking. However, the weather risk persists, and the Brazilian Arabica production outlook remains uncertain for the 2014/15 crop. Arabica is dragging Robusta prices higher as demand substitutes into the alternate variety.

Cotton

The Rabobank report indicates overvaluation of cotton prices with downward correction expected for old and new crops. Speculators are driving new crop cotton to contract highs as US ending stocks tighten. US cash prices trail futures as physical demand remains weak. However, prospective plantings are a potential bearish trigger for prices. 

Soymeal & oil

Soybean meal price will remain steady to higher before easing in Q4, with a bearish longer term outlook expected for soy oil. The report also indicates that soybean meal prices will be supported by solid US domestic disappearance. The 2013/14 US soybean meal exports are tracking near the record pace of the 2009/10 crop year. Additionally, strong palm oil prices are currently supportive and will be a key driver of soybean oil prices.


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