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Agri Commodity Markets Research (ACMR) [email protected]
+44 20 7664 9676
Agri commodity markets are expected to face headwinds as supply rebuilds, pressuring prices during 2014 and driving a rebalancing of acres in the 2014/15 season.
GRAINS & OILSEEDS SOFTS WHEAT SUGAR Neutral outlook with narrow price range expected Base case: Neutral outlook for prices with only minor
changes High case: Tightening wheat stocks for major exporters
and a weather setback will send prices higher Low case: Weaker than expected demand for wheat due
to price spreads with other feed grains resulting in a sharp build in inventories
Prices to edge higher during 2H 2014 as the supply and demand balance shifts to a deficit Base case: Record ending stocks constrain the trading
range before prices shift higher in 2H 2014 High case: Global cane acreage contracts in 2014/15
driving a larger production deficit Low case: Market remains well supplied and in
surplus during 2014/15
CORN COFFEE Supply pressures to drive corn prices lower in 2014 before acres rebalance in 2014/15 Base case: US farmers to store a significant portion of
the 2013 corn harvest into 2014 High case: Large US on farm stocks, China’s demand
exceeds expectations Low case: China’s corn import demand weakened with
the arrival of the South American crop
Coffee prices expected to ease throughout 2014 on supply pressure and producer currency weakness Base case: Surplus production weighs on prices High case: Arabica demand strengthens on weak
arbitrage, producers hold coffee stocks in anticipation of higher prices
Low case: Brazilian real depreciates to USD 2.50 driving producer sales
SOYBEANS COCOA Outlook for soybean prices is bearish on record South American crop and sustained global demand Base case: Soybean stocks are expected to recover in
2013/14 High case: Weather problems during the South
American growing period provide upside risk Low case: Downside risk is provided by lower than
expected Chinese purchases or larger than expected US soybean acreage in 2014
Bullish outlook on cocoa prices throughout 2014 as consumption continues to outstrip production, drawing down on stocks Base case: Third consecutive year of deficit
production realised in 2014/15 High case: Weather issues constrain quality and
production Low case: Emerging market demand for cocoa
products softens during 2014
PALM OIL COTTON Lower inventory levels and biodiesel demand support the palm oil price outlook
Base case: Rising vegetable oil production to limit the upside for palm oil in 2014
High case: Biodiesel demand growth, and a disappointing South American oilseed crop
Low case: Crude oil price shifts below USD 100/bbl and palm oil production is lower than expected
Bearish outlook maintained on record global stocks and rising production in 2014/15 Base case: China’s import appetite declines 66% YOY
in 2013/14, cotton area rises 3% in 2014/15 High case: China’s imports exceed 7 million bales in
2013/14, large deliveries on ICE contracts support US cash prices
Low case: China continues to pursue cotton yarn imports, manmade fibres increasingly competitive
Agri Commodity Markets Outlook 2014
Lower Prices as Stocks Build
December 2013
Stability is not a word that has been associated with agricultural markets too often over the past decade. However, 2014 is shaping up as a relatively balanced year for most agri commodities. Record prices and extreme volatility, which have typified many agri markets since the early 2000s, look set to be replaced by more balanced fundamentals, and consequently narrower trading ranges in some, if not most, markets in 2014. Global inventory levels have been rebuilding throughout 2013, and the rapid demand growth of recent seasons has slowed. Key variables to watch in the year ahead include slowing biofuel demand, commodity currency weakness and uncertain Chinese demand growth.
* Forecasts of the average price of the active contract throughout each quarter
Plateauing biofuel demand, China’s import appetite and commodity currency weakness to drive agri prices in 2014
The recent plateauing of biofuel demand has allowed global supply of grains and oilseeds to keep pace and even outstrip demand in 2013. For much of the past decade the rapid growth in biofuel demand–at around 25 percent on an annualised basis–has played a significant role in the growing supply and demand imbalance in global grain and oilseed markets. However, the maturation of the global biofuel industry, together with some weaker political incentives, has seen grain and oilseed use for biofuels begin to plateau and even decline for some commodities. While sugar-based ethanol is a slightly different story, we do not expect any material change in the current situation for grain and oilseed markets. If anything, lower mandates appear more likely than not over coming seasons. Chinese demand is an increasingly important variable for many agri commodity markets. Given the slowdown in biofuel demand growth, Chinese demand takes on an even greater role with regards to price dynamics during 2014 and beyond. China’s self sufficiency ambitions for a number of agri commodity markets have been relaxed in recent months, with an increasing acceptance that they will be net short and reliant on imports over the long run. However, the pace of imports will be driven by domestic supply trends, the rate of domestic demand growth and re-building of strategic reserves of grains and oilseeds. Recent seasons suggest that, barring a major economic slowdown, agriculture imports to China appear likely to increase again (for most commodities) in 2014.
OUTLOOK
Rabobank quarterly average price forecasts for 2014*
Commodity unit Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13(f) Q1'14(f) Q2'14(f) Q3'14(f) Q4'14(f)Wheat (CBOT) US¢/bu 643 641 871 845 736 694 650 665 645 640 640 640Corn US¢/bu 641 618 783 736 715 662 499 430 430 420 430 410Soybeans US¢/bu 1272 1426 1677 1483 1448 1474 1391 1300 1250 1200 1180 1070Palm oil MYR/t 3245 3225 2884 2277 2394 2338 2354 2590 2600 2625 2500 2600Sugar US¢/lb 24.6 21.2 21.0 19.7 18.4 17.1 16.8 17.8 17.2 18.0 18.2 18.8Coffee (ICE) US¢/lb 205 170 172 152 144 132 118 108 105 100 90 95Coffee (Liffe) US$/t 1940 2065 2095 1964 2051 1910 1794 1640 1550 1500 1400 1480Cocoa (ICE) US$/t 2308 2222 2438 2416 2173 2278 2447 2730 2850 2900 3000 3050Cotton US¢/lb 93 81 73 73 83 85 86 80 75 77 75 73
Source: Bloomberg, Rabobank
Agri commodity prices expected to stabilise during 2014 as stocks rebalance
Global grain and oilseed stocks-to-use to rise to the highest level in four seasons as stocks rebuild
-50%
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-20%
-10%
0%
10%
20%
30%
40%
50%
QoQ
price
vol
atility
Sugar Soybeans Wheat Corn
- - - Rabobank QoQ ∆ price forecast
15%
17%
19%
21%
23%
25%
27%
29%
31%
33%
35%
-100
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0
50
100
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Sto
cks-
to-u
se
Millio
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Production Change Stocks-to-use (RHS)
Source: Bloomberg, Rabobank Source: USDA, Rabobank
December 2013 1
Looking more broadly, the global economic recovery is widely expected to gather pace during 2014. In recent months, there have been signs that job creation in the US is improving, which should allow the Federal Reserve to finally start to taper the size of its monthly asset purchases. While this should lend some support to the US dollar, it will take time for the Fed to halt its QE programme and even longer before it finally starts to tighten monetary policy settings. It may be a while before the US dollar wins back significant ground vs. other major currencies, though we anticipate that a stronger US dollar should become more evident during 2H 2014. While we forecast EUR/USD at 1.28 on a 12-month view, we see risk of EUR/USD holding above 1.30 for the greater part of next year. The Brazilian real still remains on the back foot, with an underlying economy that is suffering from slowing growth and rising inflation. The local market is very long USD and the main seller of USD/BRL is still the central bank, which is intervening at a pace of USD 3 billion per week. The prospect of QE tapering in the US poses a risk to emerging market and commodity currencies alike, with depreciation expected to drive producer selling opportunities across soft commodity markets, pressuring prices. Lower Prices (for most) agri commodities as stocks build
Recent seasons of high and record high grains and oilseeds prices have incentivised farmers, resulting in an increase in global planted area for grains and oilseeds. The absence of any major production setback in 2013 has allowed production to outpace consumption, rebuilding inventory levels, particularly for corn. While most of the easing has already taken place in 2013, we expect prices to continue to ease for most markets in the grains and oilseeds complex in 2014. The 2014 outlook for soft commodities is mixed. Cocoa prices will likely increase 12% on declining ending stocks, while the sugar market is expected to transition into a deficit year of production in 2014/15, driving prices higher in 2H 2014. Following a strong year of production in 2013, Arabica prices are expected to experience further downside during 2014, which will drive ending stocks higher, while currency weakness will continue to pressure producer prices. Following a record large crop in Vietnam, Robusta prices will likely weaken during 1H 2014. Cotton prices should remain firm during 1H 2014 before easing later in the year, as US acres increase in the 2014/15 season due to weaker alternate summer crop prices.
China’s import appetite for agri commodities prevented a sharper price drop in 2013 and remains the wildcard for 2014
Commodity currency weakness to limit the upside for the sugar and coffee markets in US dollar terms during 2014
35
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60
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0
1
2
3
4
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6
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8
9
10
Millio
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nnes
Millio
n to
nnes
Corn Wheat Sugar Cotton Soybeans (RHS)
40
60
80
100
120
140
160
Inde
x 10
0=O
ct 2
010
USD Sugar/lb BRL Sugar/lbUSD Arabica/lb BRL Arabica/lb
Source: USDA, LMC, Rabobank Source: Bloomberg, Rabobank
December 2013 2
Wheat prices are delicately balanced heading into 2014, with tightening exportable stock levels increasing risks for new crop pricing. In contrast to other major grains and oilseeds markets, wheat fundamentals have seen only limited rebalancing in 2013, despite an 8% lift in global production. Significant fundamental rebalancing in other markets, importantly corn, should result in a weakening demand base for wheat in 2014, however prices will need to factor in production risks through the growing season given the tighter inventory environment, particularly among major exporters. While we do not expect a lot of upside for flat price, wheat prices are likely to maintain a strong premium over corn during 2014. OUTLOOK FOR PRICES - BASE CASE A neutral outlook for wheat prices with a relatively narrow trading range is expected in 2014. Over the past decade volatility has been commonplace in the global grains and oilseeds markets and particularly in the wheat market. Between 2003 and 2013, prices on the CBOT for wheat have traded in a range of USD10.61, from a low of USD 2.74 to a high of USD 13.35. This extreme volatility subsided in 2013, with the narrowest annual trading range (USD1.75) since 2005. While tight carry-out stocks and weather risks are a threat, weakening demand should allow prices to avoid a return to extreme volatility. Our base case scenario suggests an outlook for prices around current levels of, between USD 6 and USD 7 per bushel. We expect 2014 global wheat production to fall marginally to 687 million tonnes (-3% YOY), with slightly lower area in most regions due to a 20% decline in prices during 2013.
Wheat stocks-to-use for major exporters
8%
10%
12%
14%
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28%
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Ending Stocks Stocks/Usage
Chinese wheat imports unlikely to be sustained at 2013 levels
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Mill
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tonn
es
China Imports
Source: USDA, Rabobank Source: USDA, Rabobank
WHEAT
Neutral outlook across the forecast curve unit Q1'13 Q2'13 Q3'13 Q4'13(f) Q1'14(f) Q2'14(f) Q3'14(f) Q4'14(f)
CBOT US¢/bu 736 694 650 665 645 640 640 640
Neutral outlook with narrow price range expected Base case: Neutral outlook for prices with
only minor changes High case: Tightening wheat stocks for major
exporters and a weather setback will send prices higher
Low case: Weaker than expected demand for wheat due to price spreads with other feed grains resulting in a sharp build in inventories
300
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1,000
Q1'
11
Q2'
11
Q3'
11
Q4'
11
Q1'
12
Q2'
12
Q3'
12
Q4'
12
Q1'
13
Q2'
13
Q3'
13
Q4'
13
Q1'
14
Q2'
14
Q3'
14
Q4'
14
2011 2012 2013 2014
USc/
buHigh/Low Scenario Base Historical
Source: Bloomberg, Rabobank
December 2013 3
Demand for wheat is expected to ease in 2014/15 as cheaper feed grain alternatives take greater market share. We expect global wheat feed demand to fall by around 5.1% YOY as the relative spread between CBOT Wheat to CBOT Corn widens to its highest level in over three seasons, encouraging substitution. Slightly lower total wheat usage and production should result in a very small decline in stocks in 2014/15, although significant weather risks still remain. Chinese wheat imports are expected to weaken in 2014, following a record level in 2013. China is set to import a record 9.5 million tonnes of wheat in 2013, eclipsing Egypt to make it the largest importer of wheat globally. Imports in 2013 have primarily been from high quality exporters including Canada, Australia, and the US, due to a lack of milling quality wheat in China’s domestic crop last. In the absence of repeat quality issues, we expect Chinese imports to fall significantly YOY, to around 4.5 million tonnes in 2014. HIGH CASE Tightening wheat stocks for major exporters skew the price risk to the upside in 2014. In recent seasons, the wheat stocks-to-use ratio for major exporters has tightened from 22% to 12%, reflecting a combination of lower stocks and increasing consumption. More concerning has been the rapid contraction in major exporter wheat ending stocks falling from 74 million tonnes to 46 million tonnes in only 3 seasons, the second lowest in nineteen years. This leaves the world’s wheat importers exposed to the risk of production setbacks and a much smaller buffer to fall back on. Over the past 5 seasons there have been a number of production setbacks globally which have resulted in significant price rallies. On at least three occasions, wheat prices have rallied to price peaks between 30% and 50% above current prices, indicating there is plenty of scope for upside if a production setback should occur. LOW CASE Bearish fundamentals in the global corn balance sheet will likely weaken the demand outlook for wheat and cap upside potential for wheat prices in 2014. We expect prices to have very strong technical support between USD5.70 and USD 6.00/ bushel and given the fundamental tightness, would expect prices to find a low around this range. Higher than expected production, resulting from favourable Northern Hemisphere seasonal conditions appears the most likely driver of prices shifting to the low side of our forecast range. We do not expect prices to fall to these levels until at least the second half of 2014 when Northern Hemisphere crops are in the bin. A stronger than expected slowdown in feed demand could also result in prices falling to the low end of our price outlook range. While we expect significant substitution from corn, particularly in the US, weaker demand in 2014 may result in weaker prices.
New crop 2014 CBOT Wheat-Corn spread remains wide
150
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Usc
/bu
W Z4 - C Z4 Spread
Global wheat production to fall marginally in 2014
400
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Mill
ion
tonn
es
Production Total Consumption
Source: Bloomberg, Rabobank Source: USDA, Rabobank
December 2013 4
Corn prices are expected to trend slightly lower in 2014 as a record US harvest combines with rising production from increasing global acreage The estimated 1.8 billion bushel (45 million tonne) US stocks carryover will help to push global stocks up by 26.7 million tonnes YOY in 2013/14, driving the stocks-to-use ratio to 17.4%, the highest in three years. However, besides the jump in stocks-to-use, a number of other factors will play a role in driving prices throughout the year. These factors including the timing of farmer selling out of storage, the influence of related grain and oilseed prices, the amount of strategic reserve buying by China and commercial corn users, the number of acres planted to corn and the yet unknown weather conditions for the 2014/15 crop. OUTLOOK FOR PRICES - BASE CASE The combination of low interest rates, low commodity prices and historically strong access to cash will incentivise US farmers to store a significant portion of the 2013 corn harvest into 2014. The expected consequence of a large US on farm storage volume is slow downward price erosion as stocks trickle out. Key selling periods are usually triggered in the spring, when fertiliser is purchased and land rent payments are made. Other triggers are likely to be after the first of the year, when taxes are accrued to 2014 rather than 2013, and towards the end of July through mid-September, when storage is cleared for the next harvest. Also factored into our base case price outlook is stable trade demand with China imports totalling 7 - 10 million tonnes. Demand head winds restrict US ethanol usage to 4.8 to 4.9 billion bushels and South America produces a record amount of soybeans (151 million tonnes) and over 94 million tonnes of corn.
CORN
Corn prices to ease further during 2014 unit Q1'13 Q2'13 Q3'13 Q4'13(f) Q1'14(f) Q2'14(f) Q3'14(f) Q4'14(f)
Corn US¢/bu 715 662 499 430 430 420 430 410
Supply pressures to drive corn prices lower in 2014 before acres rebalance in 2014/15 Base case: US farmers to store a significant
portion of the 2013 corn harvest into 2014 High case: Large US on farm stocks, China’s
demand exceeds expectations Low case: China’s corn import demand
weakens with the arrival of the South American crop
300350400450500550600650700750800
Q1'
11
Q2'
11
Q3'
11
Q4'
11
Q1'
12
Q2'
12
Q3'
12
Q4'
12
Q1'
13
Q2'
13
Q3'
13
Q4'
13
Q1'
14
Q2'
14
Q3'
14
Q4'
14
2011 2012 2013 2014
USc/
bu
High/Low Scenario Base Historical
Source: Bloomberg, Rabobank
Strong price ratios for alternate crops to drive a reduction in corn acres in 2014/15
Global and US corn stocks rebuild expected to continue in 2014/15
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World Ending Stocks US Ending Stocks
World STU (RHS) US STU (RHS)
Source: Bloomberg, Rabobank Source: USDA, Rabobank
December 2013 5
HIGH CASE Fewer corn production acres to support prices beginning in Q2 2014. Even though new crop ratios are weaker than nearby ratios at just over 2.5 for soybeans-to-corn and near 1.5 for wheat-to-corn, the price gap still favours alternative crops to corn. Consequently, farmers in the US and globally are expected to decrease corn acres in 2014 northern hemisphere spring planting. Reduced corn acreage has already been seen in the 4.5% contraction in South American corn planting in favour of soybeans and a projected increase of 1 million acres of US wheat plantings in 2013/14. For 2014/15, we project that US planted area for corn will decrease 3 percent, from 95 million acres to just over 93 million acres. Fewer planted acres will support new crop corn prices at a higher level as a stronger weather premium returns to the market in mid to late Q2 2014. With the large carry over from the 2013/14 crop year, a strong new-crop to old-crop price spread is likely to develop at the sign of any 2014 production issues. If US farmers are able to hold 35% to 40% (5 billion to 6 billion bushels) of the 2013/14 crop in on farm storage into March and 20% or more (nearly 3 billion bushels) into June, fewer corn production acres would combine with any global supply disruptions to form our high-price scenario. Low interest rates and three years of record profits put farmers in a strong position to hold grain longer than normal in 2014. In addition, the US crop insurance indemnity level for the 2013 crop will insure that profit margins will generally remain positive for the 2013 season. As a result, cash price remains relatively stable as farmers hold onto crop volume while still having sufficient capital to buy inputs for the 2014 season. This signals a slow erosion of futures prices through Q2 when planting decisions begin to materialise. Consequently, the USDA January grain stocks report will be the next critical piece of information for market reaction.
LOW CASE The divergence in markets has driven the soybean-to-corn ratio to a historically unsustainable level of greater than 3. In addition, the wheat-to-corn ratio has jumped to a three-year high of near 1.6. Historically, CBOT Wheat prices have struggled to sustain a price greater than 1.5 times that of the price of CBOT Corn, and the CBOT Soybean price has stayed closer to 2.5 times the CBOT Corn price on the high side. Commodity prices of crops that compete for the same acres are generally correlated. However, with both key ratios to corn stretched to maximum levels, in Q2 of 2014, the improving fundamentals of wheat and soybeans from the South American harvest are expected to allow additional downward corn price movement.
Chinese buying is the demand wildcard for 2014. In 2014, low cost corn will present the best opportunity seen in the past four years to build strategic reserves against potential future high prices. Market estimates place corn demand for rebuilding national stocks at nearly 30 million tonnes, which would effectively double the current estimate of Chinese national stocks. The key question is how much corn will China import to fill strategic stocks. The current USDA projection of 7 million tonnes is likely on the low side for Chinese buying. As prices drop, we see this level of Chinese imports as a probable outcome, which is likely to support prices near USD 4.00/bushel. However, recent action by China to block the entry of US corn based on positive tests for unapproved GMO variety MIR 162 could signal a move to supply more demand internally. If imports drop much below the 7 million tonnes projected by the USDA, prices could drop into the USD 3.70 to USD 3.80/bushel range.
US on farm corn stocks forecast to rise to a December quarter record as growers seek higher cash prices
China’s strong corn import demand in 2013/14
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9
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Millio
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China MY Imports China Stocks-to-use (RHS)
Source: Bloomberg, Rabobank Source: USDA, Bloomberg, Rabobank
December 2013 6
CBOT Soybean prices are expected to fall in 2014 as a result of record South American production and an easing international balance sheet. While the CBOT futures curve is in backwardation, reflecting the markets expectation of increased supplies in 2014, we believe there is further downside for prices (from the futures curve) based on larger than expected supplies from South America. Climatic conditions between December and February will be critical – and prices will be subject to short term rallies on any weather scares – however, beyond this period we expect prices to ease substantially due to record South American production. Our base case reflects a much weaker price environment for soybeans during 2014 with the rate of Chinese imports and on-going tight fundamentals in the US the major supportive factors in the market.
OUTLOOK FOR PRICES - BASE CASE Soybeans are poised for a substantial downward adjustment from current levels. After two consecutive years of decline, global soybean stocks are expected to recover in 2013/14 as a result of the large harvests in the Americas. We forecast global production for 2013/14 at 283 million tonnes, generating a global production surplus of 14.9 million tonnes and increasing global stocks to 75 million tonnes. This would drive global stocks-to-use for soybeans to 29% in 2013/14, and is the main bearish factor for prices going forward.
We expect soybean production from Argentina, Brazil and Paraguay to reach 149 million tonnes in 2013/14, 9.1 million tonnes above last year’s production. In Brazil, soybean area is set to increase by 1.5 million hectares, or 5.4% over last year, as a result of the favourable soybean economics vis-à-vis corn. In Argentina, soybean area is expected to increase by 3%.
Soybean stock levels are tighter in the US than at the global level
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Sto
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to-u
se (
%)
World USA
Soybean-to-corn price ratio is at historically high levels in 2013
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3
3.5
4
Pric
e Rat
io
Soybean/Corn Price Ratio
Source: Bloomberg, Rabobank Source: Bloomberg, Rabobank
SOYBEANS
Bearish outlook for soybean prices
unit Q1'13 Q2'13 Q3'13 Q4'13(f) Q1'14(f) Q2'14(f) Q3'14(f) Q4'14(f)Soybeans US¢/bu 1448 1474 1391 1300 1250 1200 1180 1070
Outlook for soybean prices is bearish on record South American crop and flat global demand Base case: Soybean stocks are expected to
recover in 2013/14 High Case: Weather problems during the
South American growing period provide upside risk
Low Case: Downside risk is provided by lower than expected Chinese purchases or larger than expected US soybean acreage in 2014
300350400450500550600650700750800
Q1'
11
Q2'
11
Q3'
11
Q4'
11
Q1'
12
Q2'
12
Q3'
12
Q4'
12
Q1'
13
Q2'
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Q3'
13
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Q1'
14
Q2'
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14
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14
2011 2012 2013 2014
USc/
bu
High/Low Scenario Base Historical
Source: Bloomberg, Rabobank
December 2013 7
If trend line yields are achieved, Brazil’s soybean yield will be 3 tonnes per hectare, resulting in a final production of 88.7 million tonnes, an almost 8.2% increase for the world’s largest soybean producer and exporter. Argentina’s expected yield is 2.7 and final production is estimated at 53 million tonnes, 7% over last year’s production. Brazil is expected to export 45 million tonnes in the next marketing year, a 2% increase YOY, with an additional 11.6 million tonnes and 5.5 million tonnes coming out of Argentina and Paraguay, respectively. China’s import demand will continue to be one of the main supporting factors for soybean prices throughout 2014. Domestic production has decreased by 10% YOY, to 11.5 million tons and domestic stocks are running low. As a result, we forecast China’s soybean imports for 2013/14 to reach 69.5 million tonnes, 16% above last year’s levels, but 0.5 million tonnes above the USDA’s estimate. Chinese imports were high in October and November, as a result of stock re-building prior to the Spring Festival, when meat consumption peaks. The recent purchases of US soybean have sustained US cash and futures prices. However, we expect this pressure to ease into Q1 2014, as Chinese demand shifts to South America. HIGH CASE Upside to prices may come from production risk should weather shocks occur during the Southern Hemisphere summer. Despite a dryer than normal start of the season, particularly in Argentina, moisture levels have been restored and forecasts indicate a neutral rain pattern for this crop year. Planting has advanced favourably in both Argentina and Brazil. However the peak summer months (end December to mid-February) are key for crop development, and any weather shock that impacts crop yields will skew prices upwards. Delays in South American harvest reaching world markets may sustain higher prices during harvest. The South American soybean crop was slow to feed into world markets last year, given the logistical bottlenecks seen in Brazil, the slow pace of farmer selling in Argentina. Both of these situations could repeat in 2014. LOW CASE Lower than expected purchases from China provide the biggest downside risk to our price forecasts. Rabobank estimates Chinese soybean imports for 2013/14 to be 64 million tonnes, representing a key price support in the face of record South American production. Any reduction in purchases will lower the floor for soybean prices. Imports have been encouraged by recent stockpiling in advance of the festivities period and by the spread in crush margins for imported beans versus domestic beans, which are running at approximately RMB 350 /tonne and RMB 150 /tonne, respectively. US soybean area planted is likely to increase YOY in 2014/15 due to the favourable soybean-to-corn price ratio. The last time we saw a soybean-to-corn ratio of 3 was prior to the abundant production of 2009 and prior to 2005, when soybeans and corn were planted at near 50% rotation. Current ratios are unsustainable and we expect some rebalancing as soybean prices ease. However, the forecast soybean-to-corn price ratio of 2.7 for Q2 2014 is likely to provide US farmers with an incentive to switch some corn acreage to soybeans in the 2014/15 planting period. Rabobank estimates an area expansion of 2.6% for US soybean production, but any additional increase will re-enforce downward provisions.
Soybean production will increase by over 10 million tonnes in the main exporting countries
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10
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United States Brazil Argentina Paraguay
China’s soybean imports are expected to provide price support
-800.0
-600.0
-400.0
-200.0
0.0
200.0
400.0
600.0
800.0
-2.0
-1.5
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US
c/bu
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es
YOY Change in Soybean Imports (LHS)YOY Price Change (RHS)
Source: Bloomberg, Rabobank Source: USDA, Bloomberg, Rabobank
December 2013 8
Lower inventory levels are supportive of MDEX Palm Oil prices. Malaysia palm oil production dropped 6% MOM to 1.86 million tonnes in November. However, exports also declined 8% MOM to 1.52 million tonnes, resulting in stocks building up in line with trade expectations. Stocks increased 7% MOM to 1.97 million tonnes but remained 23% lower YOY. The non-materialisation of expected production gains and relatively lower stocks YOY drove MDEX Palm oil prices up 13% since the end of September to date. The declining production trend could put an end to increasing ending stocks. We expect inventory levels in Malaysia to stay below 2.0 million tonnes through the end of Q4 2013, significantly lower than 2.5 million tonnes last year. With production moving towards seasonal lows, inventories will likely decline further in Q1 2014. Indonesian palm oil production estimates for 2012/13 are reduced by 0.5 million tonnes to 28 million tonnes due to weaker production cycle. We estimate that global production increased by 3.6% YOY to 55.3 million tonnes in 2012/13 as the production cycle in 2013 proved weaker than expectations. The Malaysian FFB yields during March to October 2013 fell 4% below five-year average yields. The current declining seasonal production cycle will extend through February to March 2014 before kicking off a rising production cycle later in 2014. Indonesian and Malaysian palm oil production will likely rise by 6.5% and 2.5% YOY respectively, in 2013/14. We estimate global production will increase by 4.7% in 2013/14 to 57.9 million tonnes.
Malaysia’s palm oil stocks down 26% YOY in October
Malaysian FFB yields up 4% above the 5-year average
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Millio
n to
nnes
5yr range 5yr avg 11/12 12/13 13/14
1.00
1.20
1.40
1.60
1.80
2.00
2.20
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
FFB Y
ield
(to
nnes
per
hec
tare
)
5-year range 5-year average 2012 2013
Source: MPOB, Rabobank Source: MPOB, Rabobank
PALM OIL
Neutral outlook for Palm Oil prices unit Q1'13 Q2'13 Q3'13 Q4'13(f) Q1'14(f) Q2'14(f) Q3'14(f) Q4'14(f)
Palm Oil MYR/t 2394 2338 2354 2590 2600 2625 2500 2600
Lower inventory levels and biodiesel demand support the palm oil price outlook
Base case: Rising vegetable oil production to limit the upside for palm oil in 2014
High case: Biodiesel demand growth, and a disappointing South American oilseed crop
Low case: Crude oil price shifts below USD 100/bbl and palm oil production is lower than expected
1,500
2,000
2,500
3,000
3,500
4,000
Q1'
11
Q2'
11
Q3'
11
Q4'
11
Q1'
12
Q2'
12
Q3'
12
Q4'
12
Q1'
13
Q2'
13
Q3'
13
Q4'
13
Q1'
14
Q2'
14
Q3'
14
Q4'
14
2011 2012 2013 2014M
YR/t
onne
High/Low Scenario Base Historical
Source: Bloomberg, Rabobank
December 2013 9
Overall oilseed market will remain bearish, limiting the upside on palm oil. Production of the major oilseeds is expected to increase by 24 million tonnes in 2013/14 to 484 million tonnes, increasing 5.4% YOY. Strong production gains are expected for soybeans and sunflower oilseeds. Soybean production will likely increase 6% YOY on the back of record crops from Brazil and Argentina, which are expected to increase 7% and 8% YOY, respectively. Sunflower crops are estimated 18% higher YOY at 42 million tonnes. An increased supply of oilseeds in 2013/14 would strengthen the vegetable oil balance sheet, with stock-to-use ratios rising from 12% to 13% in 2013/14. The palm oil discount to soy oil will remain tight at USD 100 to USD 120/tonne. The bearishness in the wider oilseed complex will drive the palm soybean spread to below historical levels. This reduction would lead to demand erosion to some extent as consumers find other oils relatively more affordable. Due to tightness in palm oil supply, the CBOT Soybean Oil and MDEX Palm Oil discount dropped to the lowest level since May 2012, falling to USD 71/tonne in November 2013. For palm oil to maintain demand growth similar to 2013 levels, further discounts would be needed from current levels. We expect the soybean oil spread to remain tight until the Southern Hemisphere crop comes online. Biodiesel demand is expected to be much stronger than in 2013. Indonesia has already rolled out a B10 mandate programme, while Malaysia is considering implementing a B7 programme by the end of 2013. Based on the mandate levels, the demand from these two countries could amount to more than 3 million tonnes of additional demand for vegetable oil. However, the implementation of these programmes remains uncertain: immediate implementation of the biodiesel mandate in Indonesia remains challenging and may happen in phases. Brazil is also in the process of increasing its biodiesel mandate to B7 from the current B5, which translates to approximately 900,000 tonnes of additional vegetable oil demand. Undoubtedly, biodiesel programmes are among the strongest bullish driver for palm prices in 2014, but delays in implementing these mandates and a decline in crude oil prices could dampen the impact of these programmes and reduce bullishness.
Demand from key importers will remain relatively subdued in 2013/14 compared to 2012/13. Global palm oil demand is expected to increase by 3.6%, rising to 57.5 million tonnes in 2013/14. In the near term, demand from India should remain strong due to a reduced soybean crop. However, for the full 2013/14 year, we expect palm oil imports to rise at a modest rate of 2% to 3% to 8.6 million tonnes. The price competitiveness of sunflower and soy oil will limit the increase in palm oil imports. China’s palm oil imports rose 13% to 6.6 million tonnes in 2012/13, although we do not expect significant incremental growth in palm oil imports in 2013/14. We believe that after a subdued year of soybean imports in 2012/13, China is likely to increase its soybean buying programme to replenish reserves, especially as the 2013/14 global crop outlook looks promising. Current palm oil inventories are also softening below the 1 million tonne mark at 800,000 tonnes, which should encourage fresh buying interest from China in Q4 2013. However, this demand may not be as strong as experienced in Q4 2012.
MDEX Palm oil discount to CBOT Soy oil lowest since May 2012 India and China’s combined imports for palm products up by 12% in 2012/13
-500
0
500
1000
1500
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
USD
/ton
ne
Palm oil - Soyoil spread CBOT Soyoil MDEX Palm oil
500
700
900
1100
1300
1500
1700
1900
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Thou
sand
tonn
es
5yr range 5yr avg 12/13
Source: Bloomberg, Rabobank Source: Bloomberg, Rabobank
December 2013 10
Raw sugar futures are expected to maintain a narrow trading range during 2014, edging higher in 2H 2014 as global sugar supply and demand shifts to a more neutral balance. However, the record-large ending stocks position of 73 million tonnes forecast for 2013/14 and further USD strength is expected to limit the upside for sugar prices during 2014. It is unlikely that prices will shift back to 2013 lows for a sustained period in our view. OUTLOOK FOR PRICES (BASE CASE) In our base case price forecast, Q4 2014 ICE #11 raw sugar futures are expected to rise 5% from the current price of March 2015 futures (H15). This scenario assumes that a production surplus of 2.9 million tonnes will be reached in 2013/14. Realising this volume is still some ways off, with the large Thai and Indian harvests currently underway, which are expected to produce 11.2 million tonnes and 25 million tonnes of raw sugar, respectively. The 2014/15 global sugar balance is expected to transition into a neutral to deficit balance, capping ending stock growth for the first time in four seasons. Although it is very early to predict the final balance, we expect that prices will edge marginally higher during 2H 2014 in response, reaching an average of USc 18.8/lb in Q4 2014. However, currency weakness* across key sugar exporters (including Brazil and Australia) is expected to drive producer selling opportunities, especially during the harvest in 2H 2014, limiting the upward trajectory of prices. *– see Rabobank’s latest currency forecasts in the appendix
Global sugar balance to transition to a neutral-to-deficit situation in 2014/15, following four years of surplus
Record global ending stocks to constrain upside price movements in sugar throughout 2014
30%
32%
34%
36%
38%
40%
42%
44%
46%
48%
50%
-15
-10
-5
0
5
10
15
S/U
Millio
n To
nnes
Surplus/Deficit Stocks/Usage (RHS)
25%
30%
35%
40%
45%
50%
40
45
50
55
60
65
70
75
S/U
Millio
n To
nnes
Ending Stocks Stocks/Usage (RHS) Average S/U
Source: FO Licht, Rabobank Source: FO Licht, Rabobank
SUGAR
Sugar prices to edge higher during 2014 unit Q1'13 Q2'13 Q3'13 Q4'13(f) Q1'14(f) Q2'14(f) Q3'14(f) Q4'14(f)
Sugar US¢/lb 18.4 17.1 16.8 17.8 17.2 18.0 18.2 18.8
Prices to edge higher during 2H 2014 as the supply and demand balance shifts to a deficit Base case: Record global ending stocks constrain
the trading range before prices shift higher in 2H 2014
High case: Global cane acreage contracts in 2014/15 driving a larger production deficit
Low case: Market remains well supplied and in surplus during 2014/15
15
17
19
21
23
25
Q1'
12
Q2'
12
Q3'
12
Q4'
12
Q1'
13
Q2'
13
Q3'
13
Q4'
13
Q1'
14
Q2'
14
Q3'
14
Q4'
14
2012 2013 2014
USc/
lbHigh/Low Scenario Base Historical
Source: Bloomberg, Rabobank
December 2013 11
Investment across the sugar sector has slowed during 2013, as nearby prices have traded below the cost of production over the last 14 months. The rapid expansion of acreage from 2008/09 to 2013/14 and resulting growth in production of 3.9% (CAGR) or 32 million tonnes over this period will slow during the 2014/15 season. Consumption is projected to reach or exceed production, with the likelihood of further deficit seasons ahead in the absence of an expansion of cane acreage. HIGH CASE Weather-related production setbacks and a reduction in cane acreage during the 2014/15 season form the basis of our high case price forecast, which projects Q4 2014 prices at USc 20/lb. In this scenario, the 2014/15 production balance is expected to reach a deficit of >0.5 million tonnes. Other supportive assumptions include Managed Money rebuilding a large net long position (>180,000 lots) across ICE #11 raw sugar futures in 2014, while Index Funds are expected to increase their exposure to raw sugar while rebalancing in early 2014, providing support during Q1 2014. China’s influence on the sugar market features heavily in our high case scenario. Following the second annual reduction in domestic cane prices to RMB 440/tonne (USD 72.4/tonne), China’s cane growers are considering higher value land uses for the existing cane land, including alternate crops and permanent plantations. China’s cane price is high in international terms in an effort to sustain acreage. However, the cane price is also constraining milling margins at current raw sugar prices, and driving refineries to source imported raw sugar. If the government increases cane prices next season, milling margins would be constrained further and raw sugar imports would likely increase. However, in the absence of a policy shift or direct subsidy paid to growers, around one fifth of China’s cane land could switch to alternate uses in the 2014/15 season, driving a rapid increase in raw sugar imports. LOW CASE The possibility of a larger than anticipated global sugar surplus in the 2013/14 season and the prospect of surplus production during 2014/15 forms the basis of our low case forecasts. In this scenario, ICE #11 prices are expected to ease easing to USc 16.5/lb in Q1 2014 before lifting to USc 17.5/lb in Q4 2014. The neutral ENSO outlook suggests that ‘normal’ conditions can be expected during the Southern Hemisphere cane growing season, supporting production in 2014 and making a global sugar surplus more likely. Currency weakness for producers below our currency forecasts will also drive sugar prices down in 2014. In 2H 2014, we expect the USD/BRL to depreciate to 2.5, and assuming our Q2 2014 base case forecast of USc 18/lb, raw sugar prices in domestic currency terms could increase 19% from current levels to BRLc 45.75/lb. Further producer currency weakness would enhance the producer selling opportunities. For Brazil, currency weakness is expected to drive the sugar/ethanol arbitrage towards sugar, potentially encouraging a greater proportion of the 2014/15 crop to be used for raw sugar production.
Producer currency weakness is expected to limit the upside for raw sugar prices in US dollar terms throughout 2H 2014
China’s raw sugar imports at a record level in 2013, although this trend is unlikely to continue in 2014
40
50
60
70
80
90
100
110
120
130
Inde
x 10
0=O
ct 2
010
USD/lb BRL/lb AUD/lb THB/lb INR/lb
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Millio
n to
nnes
2010 2011 2012 2013
Source: Bloomberg, Rabobank Source: China Customs, Rabobank
--- Forecast sugar price in domestic currency terms
December 2013 12
COFFEE
Bearish outlook for coffee prices in 2014 unit Q1'13 Q2'13 Q3'13 Q4'13(f) Q1'14(f) Q2'14(f) Q3'14(f) Q4'14(f)
ICE US¢/lb 143.6 131.8 117.5 108 105 100 90 95Liffe US$/t 2051 1910 1793.9 1640 1550 1500 1400 1480
Coffee prices expected to ease throughout 2014 on supply pressure and producer currency weakness Base case: Surplus production weighs on prices High case: Arabica demand strengthens on weak
arbitrage, producers hold coffee stocks in anticipation of higher prices
Low case: Brazilian real depreciates to USD 2.50 driving producer sales
1,200
1,500
1,800
2,100
2,400
2,700
3,000
0
50
100
150
200
250
300
Q1'
11
Q2'
11
Q3'
11
Q4'
11
Q1'
12
Q2'
12
Q3'
12
Q4'
12
Q1'
13
Q2'
13
Q3'
13
Q4'
13
Q1'
14
Q2'
14
Q3'
14
Q4'
14
2011 2012 2013 2014
USD
/MT
USc/
lbHigh/Low Scenario Arabica Historical Arabica Base
Robusta Base (RHS) Robusta Historical (RHS)
Source: Bloomberg, Rabobank
OUTLOOK FOR PRICES - Arabica Arabica coffee prices are expected to ease throughout 2014 on a third year of surplus production and producer currency weakness. NY Arabica coffee prices have eased 27% in the nearby contract throughout 2013 on strong off season Brazilian production of 38 million bags. We expect a further 14% reduction in Arabica prices during 2014, to USc 95/lb in Q4 2014, as production is forecast to exceed consumption by 3.2 million bags in the 2013/14 season—the smallest surplus in two years. We expect the weak Arabica price outlook and subsequently narrow Arabica/Robusta spread to drive higher Arabica blends in 2014, and consumption is forecast to rise by 1.6% YOY—the largest increase since 2007/08. However, currency weakness for producers is likely to limit the upside for coffee prices throughout 2014, with the BRL/USD projected to reach 2.5 in the second half of 2014. A further depreciation in the Brazilian real is expected to drive Arabica prices below our base case range, particularly in Q3 and Q4 2014. OUTLOOK FOR PRICES - Robusta Supply pressures are expected to weigh on Robusta coffee prices during 2014, as a third consecutive year of surplus production is realised in 2013/14. Despite a late 2013 rally, sales of the record large Vietnamese crop (+26 million tonnes) are expected to dampen prices throughout Q1 2013 to USD 1,550/tonne. We expect Robusta prices to ease to USD 1,480/tonne in Q4 2014 on a 0.82 million tonne production surplus in 2013/14.
Consecutive years of production surpluses to drives coffee prices lower in 2014
Narrow Arabica-Robust spread to drive an increase in Arabica demand throughout 2014
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
-10
-5
-
5
10
15
Millio
n Bag
s
Robusta Arabica STU
0
50
100
150
200
250
300
350
USc/
lb
Arbitrage Robusta Usc/lb Arabica
Source: USDA, Rabobank Source: Bloomberg, Rabobank
December 2013 13
Outlook for prices – BASE CASE ICE #2 Cotton futures to ease by over 10% during 2014, as acres increase and US ending stocks rise on higher production. Global cotton acreage will likely rise 3% YOY in 2014/15 to 33.3 million hectares, as Dec/Nov 2014 price ratios favour the fibre over corn and soybeans. World cotton production is forecast to rise by 3.6 million bales to 120 million bales. The majority of the increase in world cotton acreage and production will be in the US, where production should rise by 3.1 million bales to 16.2 million bales. Ending stocks in the US, the world’s leading exporter and driver of the ICE cotton contract, are expected to rise to 5 million bales in 2014/15—the highest level in six years. HIGH CASE The upside for cotton prices is constrained in 2014 by record ending stocks of 96 million bales and a global stocks-to-use ratio of 88% in 2013/14. ICE #2 futures are likely to exceed our base case forecast if China’s cotton imports surpass 7 million bales during 2013/14 or of if US certified stocks are wound down during large deliveries in 2014, driving US cash prices higher.
LOW CASE China’s intervention in the market remains the wildcard for cotton prices in 2014. We expect imports to decline by 66% YOY in 2013/14 to 7 million bales, as increasing volumes of cotton yarn are imported and reserve stocks are released. While other textile countries, including India and Turkey, are spinning higher volumes of cotton for yarn manufacturing and export, global cotton import demand is expected to be flat YOY in 2014/15. It is increasingly clear that the days of China’s aggressive cotton importing and stockpiling regime are behind us. While cotton prices are set to commence 2014 at a similar level to 2013 of USc 80/lb, manmade fibres are increasingly competitive, ending stocks outside of China have increased 2% YOY, and the global stocks-to-use ratio is approaching an ever-more burdensome level at 90%, driving a bearish outlook.
Global cotton ending stocks and cotton ending stocks outside of China rising in 2013/14 and 2014/15
Global cotton imports to fall by 24% in 2013/14 and remain flat in 2014/15
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
20
40
60
80
100
120
Sto
cks-
to-u
se
Millio
n to
nnes
Global Ending Stocks World-China Ending Stocks
Global STU (RHS) Average STU
0
5
10
15
20
25
30
35
40
Milli
ons
tonn
es
China Bangladesh Indonesia Thailand Turkey
Source: USDA, Rabobank Source: USDA, Rabobank
COTTON
Bearish outlook maintained for cotton prices in 2014 unit Q1'13 Q2'13 Q3'13 Q4'13(f) Q1'14(f) Q2'14(f) Q3'14(f) Q4'14(f)
Cotton US¢/lb 82.8 84.5 85.7 80.0 75.0 77.0 75.0 73.0 Bearish outlook maintained on record global stocks and rising production in 2014/15 Base case: China’s import appetite declines 66%
YOY in 2013/14, cotton area rises 3% in 2014/15 High case: China’s imports exceed 7 million bales
in 2013/14, large deliveries on ICE contracts support US cash prices
Low case: China continues to pursue cotton yarn imports, manmade fibres increasingly competitive
50
70
90
110
130
150
170
190
Q1'
11
Q2'
11
Q3'
11
Q4'
11
Q1'
12
Q2'
12
Q3'
12
Q4'
12
Q1'
13
Q2'
13
Q3'
13
Q4'
13
Q1'
14
Q2'
14
Q3'
14
Q4'
14
2011 2012 2013 2014
USc/
lb
High/Low Scenario Base Historical
Source: Bloomberg, Rabobank
December 2013 14
2014 Balance Sheets
Rabobank Global Wheat Supply & Demand USDA Rabobank Rabobank(1000 Ha/1000 Mt) 07/08 08/09 09/10 10/11 11/12 12/13 13/14(f) 13/14(f) 14/15(f)Beginning Stocks 134,271 128,820 168,673 202,278 198,981 198,943 175,832 175,832 182,784Area Harvested 217,014 224,136 225,183 217,060 221,254 215,589 219,585 219,585 220,775Yield 2.8 3.1 3.0 3.0 3.2 3.0 3.2 3.2 3.1Production 612,430 683,659 686,743 652,366 697,271 656,172 711,418 711,418 687,458MY Imports 113,594 138,010 133,867 131,512 149,324 144,817 151,749 151,749 156,803 Total Supply 860,295 950,489 989,283 986,156 1,045,576 999,932 1,038,999 1,038,999 1,027,046MY Exports 117,047 144,696 137,123 133,086 157,781 137,969 156,920 156,920 156,920Feed Consumption 102,655 121,301 120,713 116,084 146,866 136,132 138,767 138,767 131,712FSI Consumption 511,773 515,819 529,759 538,005 541,986 549,999 560,528 560,528 562,306Total Consumption 614,428 637,120 650,472 654,089 688,852 686,131 699,295 699,295 694,019 Total Usage 731,475 781,816 787,595 787,175 846,633 824,100 856,215 856,215 850,939Surplus Deficit -1,998 46,539 36,271 -1,723 8,419 -29,959 12,123 12,123 -6,560Ending Stocks 128,820 168,673 201,688 198,981 198,943 175,832 182,784 182,784 176,107Stocks/Usage 21.0% 26.5% 31.0% 30.4% 28.9% 25.6% 26.1% 26.1% 25.4%
Rabobank World Corn Supply & Demand USDA Rabobank Rabobank(1000 Ha/1000 Mt) 07/08 07/08 09/10 10/11 11/12 12/13 13/14(f) 13/14(f) 14/15(f)Beginning Stocks 110,618 110,618 147,679 146,283 129,095 132,458 134,903 134,903 161,560Area Harvested 160,570 160,570 158,664 164,340 171,468 176,271 176,651 176,971 174,953Yield 4.9 4.9 5.2 5.1 5.2 4.9 5.5 5.4 5.4Production 794,578 794,578 824,168 834,210 885,987 862,880 964,282 956,877 944,812MY Imports 98,276 98,276 89,795 92,311 99,915 98,171 107,872 107,760 104,102 Total Supply 1,003,472 1,003,472 1,061,642 1,072,804 1,114,997 1,093,509 1,207,057 1,199,540 1,210,474MY Exports 98,632 98,632 96,850 91,254 116,968 91,825 112,157 110,287 106,123Feed Consumption 498,304 498,304 490,228 502,824 507,153 516,612 566,836 566,057 569,958FSI Consumption 274,887 274,887 328,595 349,631 358,418 350,169 365,605 361,637 364,998Total Consumption 773,191 773,191 818,823 852,455 865,571 866,781 932,441 927,694 934,956 Total Usage 871,823 871,823 915,673 943,709 982,539 958,606 1,044,598 1,037,981 1,041,079Surplus Deficit 21,387 21,387 5,345 -18,245 20,416 -3,901 31,841 29,184 9,857Ending Stocks 131,649 131,649 145,969 129,095 132,458 134,903 162,459 161,560 169,395Stocks/Usage 17.0% 17.0% 17.8% 15.1% 15.3% 15.6% 17.4% 17.4% 18.1%
Rabobank World Soybean Supply & Demand USDA Rabobank Rabobank (1000 Ha/1000 Mt) 07/08 08/09 09/10 10/11 11/12 12/13 13/14(f) 13/14(f) 14/15(f)Beginning Stocks 62,636 52,279 43,350 62,199 71,796 55,149 60,183 60,183 75,101Area Harvested 90,641 96,319 102,250 103,176 102,930 108,689 111,899 111,907 112,697Yield 2.4 2.2 2.5 2.6 2.3 2.5 2.5 2.5 2.5Production 219,552 211,602 260,403 263,924 239,152 268,020 284,942 283,121 286,450MY Imports 78,349 77,395 86,853 88,821 93,426 95,176 105,124 99,642 102,695 Total Supply 360,537 341,276 390,606 414,944 404,374 418,345 450,249 442,947 464,247MY Exports 1,278 1,279 1,280 1,281 1,282 1,283 1,286 1,284 1,285Crush 202,178 193,112 209,116 221,260 227,828 229,104 240,473 229,765 242,756Seed/Feed/Residual 127 128 129 130 131 132 135 133 134Total Consumption 229,593 221,049 237,765 251,448 256,955 258,306 270,867 259,136 275,644 Total Usage 308,258 297,926 329,798 343,148 349,225 358,162 379,634 367,845 384,429Surplus/Deficit -10,357 -8,929 17,458 9,597 -16,647 5,034 10,432 14,918 4,716Ending Stocks 52,279 43,350 60,808 71,796 55,149 60,183 70,615 75,101 79,818Stocks/Usage 22.8% 19.6% 25.6% 28.6% 21.5% 23.3% 26.1% 29.0% 29.0%
December 2013 15
Rabobank World Palm Oil Supply & Demand USDA Rabobank Rabobank (1000 Mt) 07/08 08/09 09/10 10/11 11/12 12/13 13/14(f) 13/14(f) 14/15 (f)Beginning Stocks 5,126 4,382 4,921 5,620 5,852 8,139 7,740 7,599 9,014Production 41,138 44,126 45,994 48,661 52,340 55,300 58,309 58,309 61,267MY Imports 30,725 34,115 35,213 36,305 39,000 41,494 42,402 42,402 43,088 Total Supply 76,989 82,623 86,128 90,586 97,192 104,933 108,451 108,310 113,369MY Exports 32,201 34,706 35,512 36,853 39,022 41,734 42,970 42,970 44,827Food 30,271 32,086 33,582 34,893 36,200 40,350 40,622 40,622 40,949Industrial 9,294 10,201 10,757 12,154 12,900 14,250 14,733 14,733 15,122Feed 841 709 756 834 931 1,000 971 971 909Total Consumption 40,406 42,996 45,095 47,881 50,031 55,600 56,326 56,326 56,980 Total Usage 72,607 77,702 80,607 84,734 89,053 97,334 99,296 99,296 101,807Surplus/Deficit -744 539 600 232 2,287 -540 1,415 1,415 2,548Ending Stocks 4,382 4,921 5,521 5,852 8,139 7,599 9,155 9,014 11,562Stocks/Usage 6.0% 6.3% 6.8% 6.9% 9.1% 7.8% 9.2% 9.1% 8.0%
Rabobank World Sugar Supply & Demand Rabobank Rabobank(1000 Ha/1000 Mt) 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 (e) 13/14 (f)Beginning Stocks 58,617 58,794 67,101 67,992 54,686 51,774 54,066 61,881 70,241Production 151,109 166,444 166,563 150,759 159,919 166,239 176,285 184,407 182,660Imports 47,758 46,980 46,069 48,537 56,186 54,451 54,147 58,562 55,937 Total Supply 209,726 225,238 233,663 218,750 214,604 218,013 230,350 246,288 252,901Exports 51,021 51,267 50,731 50,610 56,636 55,377 54,267 61,759 59,671Consumption 147,669 153,850 161,009 161,991 162,381 163,022 168,350 172,850 175,998 Total Usage 147,669 153,850 161,009 161,991 162,381 163,022 168,350 172,850 175,998Surplus/Deficit 177 8,307 891 -13,306 -2,912 2,291 7,815 8,360 2,928Ending Stocks 58,794 67,101 67,992 54,686 51,774 54,066 61,881 70,241 73,169Stocks/Usage 39.8% 43.6% 42.2% 33.8% 31.9% 33.2% 36.8% 40.6% 41.6%
Rabobank World Coffee Supply & Demand USDA USDA Rabobank Rabobank (1000 60 kg bags) 07/08 08/09 09/10 10/11 11/12 12/13 (e) 13/14 (f) 12/13 (e) 13/14 (f)Beginning Stocks 50,659 41,729 42,139 35,129 32,507 25,295 30,236 30,334 35,614Arabica Production 74,347 85,111 76,658 87,076 82,143 88,691 84,835 84,760 84,409Robusta Production 49,331 50,938 53,590 55,041 61,865 62,020 61,490 63,920 66,165Total Output 123,678 136,049 130,248 142,117 144,008 150,711 146,325 148,680 150,574MY Imports 97,568 97,536 100,722 106,405 108,996 110,571 109,921 108,000 112,000 Total Supply 271,905 275,314 273,109 283,651 285,511 286,577 286,482 287,014 298,188MY Exports 98,209 101,012 102,937 113,579 114,565 115,626 114,092 108,000 112,000Soluble Use 16,500 15,185 16,500 17,400 18,100 18,397 18,715 20,100 20,100Use 115,467 116,978 118,543 120,165 122,513 122,318 123,150 123,300 126,926Domestic Consumption 131,967 132,163 135,043 137,565 140,613 140,715 141,865 143,400 147,026 Total Usage 230,176 233,175 237,980 251,144 255,178 256,341 255,957 251,400 259,026Surplus/Deficit -8,289 3,886 -4,795 4,552 3,395 9,996 4,460 5,280 3,548Ending Stocks 41,729 42,139 35,129 32,507 30,334 30,236 30,525 35,614 39,162Stocks/Usage 31.6% 31.9% 26.0% 23.6% 21.6% 24.7% 24.8% 24.8% 26.6%
Rabobank World Cocoa Supply & Demand Rabobank Rabobank(1000 Mt) 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13(f) 13/14(f)Gross Production 3,808 3,430 3,737 3,592 3,634 4,312 4,080 3,931 3,977 Ivory Coast 1,408 1,229 1,382 1,223 1,242 1,511 1,486 1,445 1,470 Ghana 740 614 711 662 632 1,025 879 835 820Net Production 3,770 3,396 3,700 3,556 3,598 4,269 4,039 3,892 3,937Grindings 3,522 3,675 3,775 3,537 3,737 3,938 3,956 4,046 4,144 Surplus/Deficit 248 -279 -75 19 -139 331 83 -154 -207Ending Stocks 1,892 1,613 1,538 1,557 1,418 1,749 1,832 1,678 1,470Stocks/Usage 53.7% 43.9% 40.7% 44.0% 37.9% 44.4% 46.3% 41.5% 35.5%
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Rabobank World Cotton Supply & Demand USDA Rabobank Rabobank (1000 Ha/1000 480lb Bales) 07/08 08/09 09/10 10/11 11/12 12/13 13/14 (f) 13/14 (f) 14/15 (f)Beginning Stocks 62,835 61,843 61,542 47,046 50,176 73,219 89,139 89,139 95,796Area Harvested 32,827 30,568 30,133 33,463 35,716 34,326 33,032 32,290 33,309Yield 3.6 3.5 3.4 3.5 3.5 3.6 3.5 3.6 3.6Production 119,580 107,244 102,158 117,131 126,639 123,083 116,833 116,383 120,000MY Imports 39,321 30,477 36,652 35,861 45,017 46,087 38,500 34,976 35,576 Total Supply 221,736 199,564 200,352 200,038 221,832 242,389 244,472 240,498 251,372MY Exports 39,016 30,303 35,562 35,533 46,035 46,704 38,494 35,120 35,940Loss -2,619 -2,171 -807 111 -245 173 -106 144 364Use 123,496 110,032 118,942 114,218 102,823 106,373 109,679 109,438 112,820Total Domestic Use 120,877 107,861 118,135 114,329 102,578 106,546 109,573 109,582 113,184 Total Usage 159,893 138,164 153,697 149,862 148,613 153,250 148,067 144,702 149,124Surplus/Deficit -3,916 -2,788 -16,784 2,913 23,816 16,710 7,154 6,945 7,180Ending Stocks 61,843 61,400 46,655 50,176 73,219 89,139 96,405 95,796 102,248Stocks/Usage 50.1% 55.8% 39.2% 43.9% 71.2% 83.8% 87.9% 87.5% 90.6%
2014 Currency Forecasts
Rabobank Financial Markets Research
Majors (vs. USD) NOW 1m 3m 6m 12mEURUSD Curncy EUR/USD 1.3746 1.36 1.34 1.33 1.28USDJPY Curncy USD/JPY 103.17 101 102 103 107GBPUSD Curncy GBP/USD 1.6424 1.64 1.61 1.62 1.58USDCHF Curncy USD/CHF 0.89 0.9 0.93 0.93 0.98USDCAD Curncy USD/CAD 1.0642 1.06 1.05 1.04 1.03AUDUSD Curncy AUD/USD 0.9093 0.9 0.92 0.92 0.95NZDUSD Curncy NZD/USD 0.8273 0.83 0.84 0.84 0.83USDNOK Curncy USD/NOK 6.1366 5.81 5.86 5.86 5.94USDSEK Curncy USD/SEK 6.5541 6.36 6.42 6.54 6.68
Others NOW 1m 3m 6m 12mUSDBRL Curncy USD/BRL 2.3178 2.32 2.4 2.5 2.5USDMXN Curncy USD/MXN 12.8 12.8 13 12.8 12.4USDARS Curncy USD/ARS 6.25 6.62 7.02 7.44 8.36USDINR Curncy USD/INR 61.178 62 63 62 60USDTHB Curncy USD/THB 32.1 32.2 32.5 33.2 33.5
December 2013 17
Food & Agribusiness Research and Advisory Agri Commodity Markets Research (ACMR):
Luke Chandler―Global Head, Sydney +61 2 8115 2217 [email protected] Tracey Allen―Commodities Analyst, London +44 20 7664 9514 [email protected]
[email protected] +44 20 7664 9676
Contributing Analysts:
Sterling Liddell―Saint Louis, United States [email protected]
Paula Savanti―Buenos Aires, Argentina [email protected]
Pawan Kumar―Singapore [email protected]
Graydon Chong ―Sydney, Australia [email protected]
Andy Duff―São Paulo, Brazil [email protected]
Jolene Cheung ―London, United Kingdon [email protected]
www.rabotransact.com
Global Financial Markets Corporate Risk & Treasury Management Contacts: GLOBAL HEAD―Martijn Sorber +31 30 21 69447 [email protected] ASIA―Koon Koh Tan +65 6230 6987 [email protected] AUSTRALIA―Terry Allom +61 2 8115 3103 [email protected] NETHERLANDS―Arjan Veerhoek +31 30 216 9040 [email protected] EUROPE―Eliana de Rossi +44 20 7664 9649 [email protected] NORTH AMERICA―David Teakle +1 212 808 6877 [email protected] SOUTH AMERICA―Gaston Iroume +56 2 2449 8536 [email protected]
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December 2013
