Agri Commodity Markets Research

Agri Commodities Monthly – October 2012

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SELLING LEAVES MARKETS UNDERVALUED
Speculative and harvest selling pressure may cause futures prices across the agri commodity complex to drop beyond what we consider fundamental fair values this month.
GRAINS & OILSEEDS
WHEAT ///
Wheat supplies tighten further as supply concerns increase
 Global production estimates have been reduced on poor weather
 Black Sea export program is ending as supplies have run out
 Key winter wheat areas remain in drought mid-way through planting
CORN ///
Corn fundamentals remain tight but bearish technical indicators delay rally
 Speculative selling likely to continue in short term
 South American production expected to be record large – but risks remain
 US demand rationing is not sufficient to meet near-record tight balance sheet
SOYBEANS ///
Our price forecast is lowered on better supply outlook
 Higher US supply on increased area harvested and slightly better yields
 Price drop on benign South American weather and speculative selling
 Market currently appears oversold
PALM OIL ///
Palm oil Q4 price forecast lowered due to record high stock levels
 Higher than expected production pushed stocks to record high levels
 Low prices likely to spur higher demand
 Supplies to be drawn down in early 2013
SOFTS
SUGAR ///
We maintain our price forecast and expect prices to average below USc 20/lb on increasing supplies
 Thai and Brazilian crops still weather dependent but base-case scenarios suggest building surplus
 Demand outlook not viewed as constructive with buyers expected to hold off on extending coverage until prices fall further

COFFEE ///
We maintain our view that Arabica will trend upwards towards the USc 170/lb level and Robusta will fall on harvest pressure
 Falling NY prices slowed the physical market and less grower selling is supportive
 Weather in Vietnam looks supportive for production

COCOA ///
We have reduced our cocoa price forecast but remain positive given fundamental outlook
 West African production concerns are reduced
 European grindings were 16% lower in Q3 but outlook is positive

COTTON ///
Emerging quality concerns are a short term impact as global fundamentals continue to weaken
 US cotton export volumes for the current marketing year on par with the 5-year average although total commitments are lagging
 China’s cotton import programme has had the strongest start in eight years supporting international prices

Food and Agribusiness Research & Advisory
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ENDS