Agricultural prices are likely to decline by 10% in 2013 as global agricultural commodity markets shift from a squeeze to a surplus, according to the annual commodities outlook by Rabobank. Prices are expected to remain volatile, however.
The bank’s economists look for corn futures prices to fall 24% from first quarter 2013 to average $6/bushel in fourth quarter 2013 during the U.S. 2013 harvest. Despite the bearish outlook, the beginning of 2013 is expected to see corn prices rise from current levels to encourage further demand rationing in the U.S.
Soybean prices, meanwhile, are expected to be supported in the first quarter 2013 on tight export supplies before declining as production declines later in the year, with prices for the year averaging below 2012 levels.
Wheat futures prices are forecast to rise to $9.10/bushel in first quarter 2013 and then fall 23% to $7/bushel by the fourth quarter 2013. Global cotton prices are forecast to plateau in the first half of 2013 as the market faces its largest ever period of oversupply, before the curve lifts modestly by year’s end.
Global stocks-to-use of corn, wheat and soybeans will rise just 1.9 points to 19.9% and will remain below 2011/12 levels, sustaining prices in the second half of the year, Rabobank predicts. Multi-season surpluses will be required to rebuild inventories and rebalance fundamentals.
While global uncertainty continues to cloud the outlook for the agriculture commodity market, Rabobank does not see a material slowdown in global demand. In fact, Rabobank forecasts world GDP to increase 3.75% in 2013, sustaining demand even as agri markets are challenged to rebuild global stocks despite precariously balanced fundamentals. Prices in the first quarter will slow demand and encourage increased global production, resulting in a rebalancing of fundamentals and weaker price outlook in the second half of 2013. Still, the lack of buffer inventory leaves the market exposed to another season of volatility and uncertainty.