Rabobank 2013 report: Rocky road for grain and oilseeds
According to a report from Rabobank’s Agri Commodity Markets Research department 2013 is to be a volatility year in agri commodity prices. In particular for the grain and oilseeds markets, with a tight supply in the first six months pushing prices higher, before an expected production rebound leading 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.
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&P 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.”
Rabobank makes the following predictions for 2013:
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.
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.
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.
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