Rabobank in business

24-4-2008 | Other news

Rabobank has called on its global network of 75 analysts from Food & Agribusiness Research and Advisory to highlight the key price movements and market fundamentals for a select group of the world's major soft commodities: corn, wheat, soybeans and sugar. The first edition of the Rabobank's Soft Commodities Monthly Report also makes forecasts and charts world price indicators throughout 2008.

Agricultural investors
The general financial market turbulence and risk aversion appear to have prompted a withdrawal of fund money across commodity markets. Falling confidence in the US economy has also resulted in a sharp withdrawal of investor money from agricultural commodity markets. As a result, all commodity prices, both agricultural and non-agricultural have suffered with some sharp sell-offs. 

Price direction factors
Soft commodities price direction throughout 2008 will be heavily dependent on final planting decisions in the US, weather conditions in the US over coming months and sustained world demand. As the soybean harvest progresses in Brazil and Argentina without any major weather disruption, focus will next turn to US weather conditions for corn, soybean and spring wheat plantings.

Price relationships between the various crops that are bidding for a limited amount of arable land in the US are extremely important for farmer decision making as well as consumer decision making. 

Corn planting plans in U.S.
Using extensive survey data, the USDA report forecasted an 8% year-on-year decline in corn plantings in 2008. Favourable prices for alternate crops, higher input costs and crop rotation needs are expected to result in a significant acreage shift towards soybeans and wheat. Despite this anticipated decline on last season’s 65-year corn acreage high, US farmers still intend to plant 86 million acres of corn, the second highest level since World War II.

Farmers can still plant soybeans and wheat
However, the corn acreage forecast is by no means a final plantings number as some farmers are still able to change their planting decisions and with the recent corn price gains relative to soybeans, spring wheat and even cotton the final acreage number may prove to be somewhat higher. Soil management and record-high fertilizer prices are expected to provide enough incentive for significant acreage swings away from corn to soybeans and wheat in the 2008/09 season. 

Sugar supply & demand 
Sugar had a turbulent start to the year, and from today’s standpoint, the fundamental picture for the year remains rather gloomy. Looking purely at supply, demand, stocks and export availability/import demand, there would seem to be little justification for international sugar prices to be substantially higher in 2008 than they were in 2007.

Rabobank's analysts aim to provide clients with value added initiatives such as this monthly report to support their business development.