Rabobank 2013 Commodities Outlook: Agri markets to remain volatile as fundamentals ‘rebalance on a tightrope’
Volatility in agri commodity prices looks set to continue into 2013, according to a report from Rabobank’s Agri
Commodity Markets Research department. This will be particularly true for grain and oilseeds markets, with a supply
squeeze in the first six months expected to push prices higher, before an expected production rebound leads to a
weakening in prices in the second half of the year. The report says soymeal is the commodity likely to show the largest
price decline by the end of 2013. In contrast, Rabobank analysts expect palm oil to be the strongest performer, as
Chinese imports and biofuel demand drive prices higher after the sell-off in 2012. The soft commodity markets should
continue in the same vein as this year, with prices expected to be relatively range bound.
Grain and oilseed prices – corn, wheat, and the soy complex – are forecast to rally in the first quarter of 2013, as a
supply squeeze builds pressure and prices are forced higher to ration demand. Current use levels – particularly for
corn, wheat and soybeans – appear to be running too fast given the sub-optimal 2011/2012 crops in both the US and South
America. Higher prices early in the year will also encourage record plantings of row crops in the US during 2013. Prices
are expected to fall in the second half of 2013 as production rebounds, shifting fundamentals into a small surplus.
However, lingering drought in the US remains a key risk to this surplus and to consequent production and price forecasts
for the year.
Rabobank’s outlook for soft commodity markets – sugar, cocoa and cotton – is neutral to slightly bearish in 2013.
Fundamentals in soft commodities are more balanced, and in some cases (e.g. sugar and cotton), surpluses have been built
over recent seasons. Despite the support of a weaker US dollar, some soft commodity prices are forecast to fall to
multi-year lows in 2013. Record coffee, cotton and sugar crops in 2011/2012 resulted in strong downward corrections in
2012, meaning that the softs have already moved through the cycle expected for grains and oilseed in 2013. The softs
markets have now fallen near levels which Rabobank deems as fair value, with expected unwinding of investor short
positions and commercial buying to keep markets flat or supported throughout 2013.
Luke Chandler, Global Head of Rabobank’s Agri Commodity Markets Research (ACMR) department, said, “Weak global economic
growth and continued macro uncertainty may cause a slight drag on demand for agricultural commodities in 2013; however,
a low US dollar will provide support for prices. Speculative money flows will also remain very sensitive to macro
uncertainties with the risk-on/risk-off trading pattern of 2012 likely to continue. Using the S Agri Index as a proxy for our commodity forecasts, we expect a decline in agricultural prices of around 10% between Q1
and Q4 of 2013.” Blad
Rabobank makes the following predictions for 2013:
Cocoa - Cocoa prices are expected to move sideways to slightly higher in 2013 amid tightening fundamentals.
Coffee - Coffee prices are expected to increase in 2013 finding support from increasing global demand and tightening stock
Corn - We expect CBOT corn prices to fall 24% from Q1 2013 to average USD 6/bushel in Q4 2013 during the US 2013/14 harvest.
Despite the bearish outlook, the beginning of 2013 is expected to see prices rise from current levels to encourage
further demand rationing in the US.
Cotton - Global cotton prices are forecast to plateau in 1H 2013, as the market faces its largest ever period of oversupply,
before the curve lifts modestly by year end.
Palm Oil - Palm oil prices are forecast to rise in Q1 2013 as stocks are drawn down from record high levels, before falling later
in the year as palm oil and soybean output rebound.
Soybeans - Soybean prices are expected to remain supported in Q1 2013 on tight export supplies before declining as production
rebounds later in the year, with prices for the year averaging below 2012 levels.
Soymeal - CBOT soymeal prices are likely to drop by nearly USD 75/ton from current levels by the end of 2013 as demand slows.
Soy Oil - Soy oil prices are forecast to remain rangebound at the beginning of 2013 on high US supplies, before increasing in
mid-2013 as supplies are drawn down.
Sugar - Sugar prices (ICE #11 contract) are forecast to ease 5% over the next 12 months as world sugar supply reaches a net
surplus of 5.9 million tonnes.
Wheat - CBOT wheat prices are forecast to rise to USD 9.10/bushel in Q1 2013 and then fall 23% to USD 7.00/bushel by Q4 2013.