Home > Seasonal lows for grains and oilseeds; coffee and sugar under pressure: Rabobank Agri Commodities Monthly August

Seasonal lows for grains and oilseeds; coffee and sugar under pressure: Rabobank Agri Commodities Monthly August

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The August edition of the Rabobank Agri Commodities Monthly report reveals that grains and oilseeds markets are finding seasonal lows, while Brazilian real weakness continues to pressure the coffee and sugar markets.

The USDA's August WASDE exerted downward pressure on grains, with higher-than-expected US production estimates for corn and soybeans, and higher global wheat estimates. Rabobank believes that the market is looking at more moderate yields, and may be finding the lows.


The wheat segment maintains a neutral price outlook despite pressure from large harvests. Though the global wheat balance sheet is heavy, quality issues in the US market are providing underlying price support. However, production risk in the southern hemisphere will linger, as El Nino is set to persist through 2015 and likely into 2016.


The Brazilian real continues to drive the short-term direction, with Q3 being the lowest in the price cycle. Volatility is expected to increase through Q4, particularly with Fed hike and weather risks. Southern hemisphere cane harvests are progressing well with favourable weather driving a good pace.


Corn price forecast has been revised down as beneficial weather improves yield prospects. The USDA unexpectedly increased its US yield and ending stocks forecasts in August. Rabobank is taking a more conservative approach and estimates US corn yield at 165 bu/acre, with ending stocks about 200m bu down YOY. The EU balance sheet is tight with corn affected by excessive heat and production estimated at only 60m tonnes. Brazil and Ukraine will be key suppliers to meet the import demand.


Sharp fund position changes are likely to lead to increased volatility. Brazil crop estimates are to be revised down in light of a lower proportion of large beans. Heightened volatility is likely as Brazil weather becomes a key factor. Arabica prices have risen on the back of less-than-ideal yields in Brazil with Rabobank increasing its near-term forecast from USc 133/lb to USc 134/lb.


Price forecast for soybeans has been revised slightly lower on beneficial August weather. Soy oil outlook remains bearish, while meal is more supportive. Uncertainty about US crop size will remain, especially after USDA expects the second-highest yields following last year's record. US exports will continue to suffer from a strong US dollar. The Chinese crush remains strong, despite a massive decline of the hog herd. Basis values for soybean oil and canola are not reflecting tight supplies but global demand for soymeal remains strong.


Crop estimates are being lowered due to dryness in West Africa; dry weather in Ghana may hinder a full production recovery. Rabobank expects another small global deficit of 56,000 tonnes in 2015/16, representing just over 1% of global production but adding to the 2014/15 deficit of 30,000 tonnes.

Palm Oil

Palm oil prices remain under pressure in near-term weighed down by large stocks as well as pressure from crude and soybean oil. Near-term demand remains subdued, but the increased soy oil/palm spread encourages demand and lends price support. Weather threat, due to the persisting El Nino, will keep the complex volatile.


USDA shocks the cotton market into gear with a 10% US production downgrade MOM. Rabobank maintains a US production estimate of 14.3m bales. Mill demand remains the pivotal driver of medium-term price direction. 

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