Agri Commodities Monthly – March 2012

Agri Commodity Markets Research

Agri Commodities Monthly – March 2012

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Beans Still Brightest, as Battle for Acreage Heats Up
Soybeans will continue to outperform despite being the strongest price mover in the agri commodity complex YTD, although the release of the USDA Prospective Plantings estimates on Friday, 30 March, will be critical to our forecasts.
Grains & Oilseeds
Wheat

We leave our deferred price forecasts for wheat unchanged though flag the risk of higher volatility surrounding the Prospective Plantings report
* Wheat supply still abundant– but old crop prices to continue to be supported by tight soybean and corn markets
* North African drought to put significant pressure on 2012/13 durum stocks
Corn

We raise our Q1 price forecast for corn but leave the remainder of the forecast curve unchanged with the USDA prospective plantings likely to prove bearish.
* 2011/12 Chinese crop reduced with imports increased slightly
* Soybean rally to constrain corn acreage following prospective plantings report
Soybeans

Our soybean price forecast is increased as we expect the extent of South America’s crop loss has yet to be fully priced in
* Reductions to our South American production forecast lower our global soybean production forecast by 9% YOY
* Demand remains strong on improved crush margins and unabated Chinese imports
Palm Oil

We raise our palm oil forecast this month along with soybean prices due to smaller global supplies
* We expect shortfalls in oilseed production in major palm oil importing countries will continue to support palm oil export demand
* Rising soybean prices amid palm oil’s seasonal slowdown in production will cause prices to remain elevated into Q2
Softs
Sugar

Sugar prices have stayed elevated on uncertainty about the Brazilian cane output but due to the expected surplus we maintain our forecast of lower prices
* Reductions in the expectations of the Brazilian represent a strong upside risk
* End user buying likely to remain weak until prices ease
Coffee

Coffee markets continue on divergent paths, but we anticipate this short term dynamic to reverse in Q2
* Speculator shorting spurred by Brazilian grower selling but this is a weak position subject to a quick reversal
* Buoyant Robusta prices are set to fall in Q2 due to increased supply and a falling investor long position
Cocoa

Cocoa prices are expected to move higher on uncertainly of supply and increased user demand
* Grinding demand is still strong but product inventory increases will temper any price upside in beans
* Lower quality beans in Ivory Coast supportive for international prices, raising concerns about the new government’s forward-selling scheme
Cotton

US Cotton area concerns and good export sales are seen as short term support and we expect lower prices in Q2
* Good US cotton sales the main supportive factor in the market but likely a result of buyers switching from India supplies after the export ban
* Slowing Chinese buying pace and sluggish demand in Q2 is expected to weigh on markets

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ENDS

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