Prices for grains other agricultural commodities will probably continue rising in 2011 as “precariously balanced” fundamentals and a La Nina phenomenon contribute to wide price swings, Rabobank analysts said.
Corn, soybeans and coffee hold the most potential upside among about 10 commodities, Rabobank Agri Commodity Markets analysts led by Luke Chandler said in a Dec. 21 report. While corn, soybean and wheat supplies appear sufficient for the time being, record crops are likely needed next year to keep inventories from tightening further.
Favorable weather conditions “are necessary for almost all agricultural commodity markets in 2011 to rebuild inventory levels and prevent a rally in prices back to the highs of the 2007-08 commodity boom,” the London-based analysts said.
Corn is expected to average $6 a bushel during the first quarter of 2011 and $5.80 during the second quarter, up from $5.50 so far in the current quarter, the analysts said. Soybeans are expected to average $13 a bushel in the first quarter and $12.75 in the second quarter, up from $12.15 during the fourth quarter of 2010.
Rabobank “maintains a constructive outlook on agricultural commodity prices into 2011, with precariously balanced fundamentals in a number of markets setting the stage for higher prices in the year ahead,” the report said.
“But as in 2010, we expect bearish macro headwinds will lead to further price uncertainty and continued heightened volatility, making the road to higher prices a bumpy one,” the report said. Rabobank is based in the
Corn futures are already up 46 percent this year, reflecting a disappointing
Near today’s close, March corn futures in
Additionally, one of the strongest La Niña patterns in the past 50 years has fueled concern over crop shortfalls in some key growing areas. La Nina has been linked to dryness in
“Global inventory levels for a number of agricultural commodity markets are at or nearing record‐low levels,” the analysts said. “And with robust demand growth from emerging market economies – particularly
With several agricultural commodities in need of expanded production to rebuild inventories, “significant” supply constraints are likely to emerge, Rabobank said. In the
“There is a convergence of pressures building on land availability next season,” the analysts said. “Consequently, there will be winners and losers as not all of the supply issues can be solved in one season.”