Wheat analysts are the most bearish in a year as farmers reap a record crop that is contributing to the longest decline in global food prices since 2009.
Nineteen analysts surveyed by Bloomberg News expect prices to fall next week, three were bullish and two neutral, the highest proportion of bears since the survey began in November 2012. Global output may reach a record 696.4 million metric tons in the 2013-14 marketing year that ends in June, 5.5 percent more than forecast in September, the London-based International Grains Council said yesterday.
Prices for most agricultural commodities are plunging after growers sowed more acres and yields in the U.S., the biggest exporter, recovered from the worst drought since the 1930s. Global food costs tracked by the United Nations tumbled for five consecutive months, the longest streak since the start of 2009. That will help diminish what the international group estimates is an annual food-import bill exceeding $1 trillion.
"The bloom is off the agricultural markets," said Dan Basse, the Chicago-based president of AgResource Co., a research company. "We are in a period where farmers have ramped up supplies around the world and global demand growth is relatively stagnant compared with production. 2014 will be a year of adequate supplies moving toward surplus."
Wheat, the best-performing commodity in 2012, fell 15 percent to $6.6475 a bushel on the Chicago Board of Trade this year. The Standard & Poor’s GSCI gauge of 24 raw materials dropped 4.4 percent and the MSCI All-Country World Index of equities gained 17 percent. The Bloomberg U.S. Treasury Bond Index lost 1.9 percent.
Prices fell 6.5 percent since reaching a four-month high of $7.1125 on Oct. 21 because of easing concern about winter-wheat planting in Ukraine and Russia, which had been delayed by rain. Futures are still retreating after India, the biggest grower after China, reduced its export price this week, which may stimulate shipments.
"Fundamentally it is pretty bearish," said Dan Hofstad, a risk management consultant at INTL FCStone Ltd. in London. "It looks like the situation in eastern Europe was maybe not as bad as perceived a month or two ago. The other story at the forefront is the Indian wheat export program, and what that means for extra volume on the market."
The International Grains Council raised its estimate for combined production from countries in the former Soviet Union by 1.6 percent to 102.5 million tons, as higher production in Kazakhstan offset smaller-than-expected output in Russia.
Production in Canada, the third-biggest exporter, may be 8.2 percent larger than previously expected at 33 million tons, the IGC said. The agency left its forecast for U.S. output unchanged at 57.5 million tons. The U.S. Department of Agriculture is scheduled to update its global supply and demand forecasts for grains and oilseeds on Nov. 8.
Wheat supplies are rising just as corn and soybean harvests expand to records, spurring a 19 percent drop in the S&P GSCI Agriculture Index of eight commodities this year. While lower prices are cutting food costs, they’re also curbing income for producing nations. Brazilian soybean exports generated $17.2 billion of income last year, according to data from ITC TradeMap, a venture between the UN and World Trade Organization.
Corn and soybean analysts are the most bearish in three weeks. Nineteen of 27 surveyed anticipated lower corn prices and six said the grain will rise, while 15 of 28 said soybeans will drop and seven expected higher prices. Corn fell 39 percent to $4.2675 a bushel this year in Chicago and soybeans retreated 10 percent to $12.6175 a bushel.
The USDA forecast a 28 percent jump in U.S. corn output to a record 351.6 million tons in September and predicted a 4.4 percent gain in soybean production to 85.7 million tons. Brazil may overtake the U.S. as the top soybean producer in 2013-14, with the South American country’s harvest expanding 7.3 percent to a record 88 million tons, the USDA estimates.
Eleven of 17 surveyed expect raw sugar to fall next week and four were bullish, the biggest proportion of bears since August. The commodity dropped 6.1 percent to 18.32 cents a pound in New York trading this year.
Copper will gain next week, 11 traders and analysts said. A further six were bearish and 10 were neutral. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, dropped 8.4 percent to $7,268 a ton this year.
Gold analysts and traders were divided, with 13 of 33 expecting higher prices. Eleven were bearish and nine neutral. Bullion slid 22 percent to $1,313.74 an ounce in London this year, heading for the first annual decline since 2000 after some investors lost their faith in the metal as a store of value.
The U.S. Federal Reserve said Oct. 30 it would maintain its $85 billion monthly bond-buying program while noting that there are signs of "underlying strength" in the U.S. economy. Gold rose 70 percent from December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system.
"It’s clear that central banks around the world, including the Fed, intend to keep on with their monetary stimulus," said Adrian Day, who manages about $135 million of assets as the president of Adrian Day Asset Management in Annapolis, Maryland. "This is bullish for gold."