Agriculture products 'down but not out'

Global agri-commodity prices are forecast by Rabobank to be "down but not out" next year.

Improved fundamental balances and uncertain economic conditions were expected to keep prices below this year's highs.

However, risks to its price forecasts were skewed upwards as reliance upon non-traditional producers posed an increasing threat, and inventories remained near historical lows.

In a report released this week, the bank said its outlook was centred on four key themes which it expected to determine commodity prices.

Aside from the inherent weather uncertainties in agriculture, those variables identified as critical over the next 12 months comprised economic slowdown, speculators and the US dollar, policy risks and capacity constraints.

Agri-commodity demand should remain robust in 2012, as growing consumer demand in emerging-market economies continued to drive the sector.

Rabobank analysis suggested that supply side risks, from both weather and politics, have increased again for 2012 and there remained considerable risk of an inflection in both price and volatility levels amid adverse production conditions across the sector.

Included in the bank's 12-month outlook for prices from current levels were.-

• Cotton prices to fall due to the largest global cotton crop on record.

• Coffee prices to fall due to the large harvests expected in Brazil and Vietnam, but diminished stocks would keep risks high.

• Lower international sugar prices as the market shifted into a surplus for the first time in three seasons.

• Low stock levels of total vegetable oils to limit palm oil's price downslide.

• Momentum in the US lean-hog market expected to wane as producers increase farrowing to meet demand and Chinese import growth slows.

• Abundant supply of cocoa beans and better expectations for the 2011-12 crop expected to lead prices lower in 2012.

• It was expected corn prices, although lower than 2011 averages, would rally from current spot prices into the second quarter of 2012 before easing in the fourth quarter, on record production.

• US live cattle prices are expected to fall in the first quarter of 2012 from their November 2011 highs as a record number of cattle on feed outstrips demand in the near term.

• Cotton and livestock were the most vulnerable, Rabobank said.

 

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