MARKET DEVELOPMENT
Rabobank Issues 2015 Commodity Market Outlook
Rabobank Issues 2015 Commodity Market Outlook
15/12/2014 (High Plains Journal) - Agriculture financing giant Rabobank has published its outlook pertaining to global commodity markets in 2015, looking at issues of demand, supply and pricing across international commodities and forecasting a 12-month price outlook for 12 major commodities.
In the report, the bank’s Agri Commodities Markets Research analysts say fundamentals in the agri commodity markets appear more balanced through 2015, but they expect narrower trading ranges for many commodities versus 2014.
On the demand side, growth has slowed in recent years. However, lower price levels should encourage consumption growth, which will support prices. Rabobank says key variables to watch in the year ahead are U.S. dollar strength, uncertain Chinese demand growth, slowing biofuel demand and oil price weakness.
“2015 will be another interesting year for agri commodities,” Stefan Vogel, global head of Rabobank Agri Commodities Markets Research, said. “Macro drivers remain very much in play and price swings from supply and demand shocks are still likely, given that the stocks for most commodities are not yet at levels necessary to provide an adequate buffer.”
The pace of world economic growth has been disappointing during 2014, particularly in the Eurozone where counter sanctions from Russia have hindered economic recovery. Rabobank says the UK and the U.S. are the bright spots for 2015, but their pace of expansion will be tempered by slow growth elsewhere. Significantly, in 2015 Rabobank expects a downward revision of China’s 7.5 percent annual growth rate.
Rabobank says farmer selling and planting decisions, global demand and weather-related production risks remain key drivers through 2015. Assuming normal growing conditions, moderate increases in demand will allow stocks to build for most commodities through 2015.
However, the projected lower price levels through 2015 also provide a great incentive for consumption to exceed the forecast levels. In particular, China’s import demand will continue to be one of the most important variables for many agri commodity markets.
On the supply side, weather-related production abnormalities will impact agri commodity prices. The weather in 2014 was somewhat of an anomaly for agri commodity production, with favorable to ideal growing-season conditions experienced across most regions driving bumper crops across commodities.
The only exception was persistent drought conditions across central and southeast Brazil and the east coast of Australia. Despite the higher beginning stocks in 2015, weather threats, including risk of a weak-to-moderate El Nino, could cause prices to diverge from the firm’s base case.
Outlook by commodity
Live cattle: Bullish cattle price outlook is driven by tight supply and continued strong demand, as the cattle herd is projected to decline by a further 2 to 3 percent year over year.
Cotton: The ICE #2 is expected to remain subdued through 2015, as China’s import demand is projected to slow by the most since 2008-09.
Wheat: Prices are expected to stabilize after finding a base early in 2015, as the heavy global balance sheet weighs on the market.
Sugar: ICE #11 futures are expected to maintain an upward trajectory during 2015. However, heavy stocks at both origins and destinations and a depreciating Brazilian real will limit the amount of price recovery.
Palm oil: Prices are expected to improve in 2015, although strong soybean supplies will limit the upside.
Corn: Prices are expected to increase slightly through 2015, as widespread crop storage and declining planted acres will provide some sales support.
Soymeal: Prices in 2015 will be below the high levels of the last two years, but will be supported by strong global demand.
Soy oil: Futures are expected to move lower to sideways over the course of 2015, with a stronger bearish move later in the year.
Lean hogs: Futures are expected to ease in 2015, as U.S. pork production recovers. Rabobank forecasts 3 percent production growth, following the outbreak of PEDv in late 2013 and early 2014.
Coffee: Prices are expected to remain elevated throughout 2015, supported by a tighter supply situation and declining stocks of Arabica.
Cocoa: Futures are expected to remain under pressure through 2015, easing from an average of $2,800 per tonne in Q1 to $2,700 per tonne in Q4 2015.
Soybeans: Prices in 2015 are expected to trade in a tighter range than in previous years, as global soybean availability has significantly improved since the record U.S. crop.
Rabobank Group is a global financial services leader providing wholesale and retail banking, leasing, real estate services and renewable energy project financing. Founded over a century ago, Rabobank is one of the largest banks in the world, with nearly $1 trillion in assets and operations in more than 40 countries.
In North America, Rabobank is a premier bank to the food, beverage and agribusiness industry. Rabobank’s Food & Agribusiness Research and Advisory team is comprised of more than 80 analysts around the world who provide expert analysis, insight and counsel to Rabobank clients about trends, issues and developments in all sectors of agriculture. For more information, visit www.rabobank.com/f&a.
In the report, the bank’s Agri Commodities Markets Research analysts say fundamentals in the agri commodity markets appear more balanced through 2015, but they expect narrower trading ranges for many commodities versus 2014.
On the demand side, growth has slowed in recent years. However, lower price levels should encourage consumption growth, which will support prices. Rabobank says key variables to watch in the year ahead are U.S. dollar strength, uncertain Chinese demand growth, slowing biofuel demand and oil price weakness.
“2015 will be another interesting year for agri commodities,” Stefan Vogel, global head of Rabobank Agri Commodities Markets Research, said. “Macro drivers remain very much in play and price swings from supply and demand shocks are still likely, given that the stocks for most commodities are not yet at levels necessary to provide an adequate buffer.”
The pace of world economic growth has been disappointing during 2014, particularly in the Eurozone where counter sanctions from Russia have hindered economic recovery. Rabobank says the UK and the U.S. are the bright spots for 2015, but their pace of expansion will be tempered by slow growth elsewhere. Significantly, in 2015 Rabobank expects a downward revision of China’s 7.5 percent annual growth rate.
Rabobank says farmer selling and planting decisions, global demand and weather-related production risks remain key drivers through 2015. Assuming normal growing conditions, moderate increases in demand will allow stocks to build for most commodities through 2015.
However, the projected lower price levels through 2015 also provide a great incentive for consumption to exceed the forecast levels. In particular, China’s import demand will continue to be one of the most important variables for many agri commodity markets.
On the supply side, weather-related production abnormalities will impact agri commodity prices. The weather in 2014 was somewhat of an anomaly for agri commodity production, with favorable to ideal growing-season conditions experienced across most regions driving bumper crops across commodities.
The only exception was persistent drought conditions across central and southeast Brazil and the east coast of Australia. Despite the higher beginning stocks in 2015, weather threats, including risk of a weak-to-moderate El Nino, could cause prices to diverge from the firm’s base case.
Outlook by commodity
Live cattle: Bullish cattle price outlook is driven by tight supply and continued strong demand, as the cattle herd is projected to decline by a further 2 to 3 percent year over year.
Cotton: The ICE #2 is expected to remain subdued through 2015, as China’s import demand is projected to slow by the most since 2008-09.
Wheat: Prices are expected to stabilize after finding a base early in 2015, as the heavy global balance sheet weighs on the market.
Sugar: ICE #11 futures are expected to maintain an upward trajectory during 2015. However, heavy stocks at both origins and destinations and a depreciating Brazilian real will limit the amount of price recovery.
Palm oil: Prices are expected to improve in 2015, although strong soybean supplies will limit the upside.
Corn: Prices are expected to increase slightly through 2015, as widespread crop storage and declining planted acres will provide some sales support.
Soymeal: Prices in 2015 will be below the high levels of the last two years, but will be supported by strong global demand.
Soy oil: Futures are expected to move lower to sideways over the course of 2015, with a stronger bearish move later in the year.
Lean hogs: Futures are expected to ease in 2015, as U.S. pork production recovers. Rabobank forecasts 3 percent production growth, following the outbreak of PEDv in late 2013 and early 2014.
Coffee: Prices are expected to remain elevated throughout 2015, supported by a tighter supply situation and declining stocks of Arabica.
Cocoa: Futures are expected to remain under pressure through 2015, easing from an average of $2,800 per tonne in Q1 to $2,700 per tonne in Q4 2015.
Soybeans: Prices in 2015 are expected to trade in a tighter range than in previous years, as global soybean availability has significantly improved since the record U.S. crop.
Rabobank Group is a global financial services leader providing wholesale and retail banking, leasing, real estate services and renewable energy project financing. Founded over a century ago, Rabobank is one of the largest banks in the world, with nearly $1 trillion in assets and operations in more than 40 countries.
In North America, Rabobank is a premier bank to the food, beverage and agribusiness industry. Rabobank’s Food & Agribusiness Research and Advisory team is comprised of more than 80 analysts around the world who provide expert analysis, insight and counsel to Rabobank clients about trends, issues and developments in all sectors of agriculture. For more information, visit www.rabobank.com/f&a.