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Rabobank issues 2015 commodity outlook

By Staff | Dec 16, 2014

NEW YORK, N.Y. (Rabobank) – Rabobank has published its outlook for the global commodity markets in 2015, looking at issues of demand, supply and pricing across international farm commodities, and forecasting a 12-month price outlook for 12 major commodities.

In the report, the bank’s farm commodities markets research analysts say that fundamentals in the agri commodity markets appear more balanced through 2015, but they expect narrower trading ranges for many commodities versus 2014. On the demand side, growth has slowed in recent years. However, lower price levels should now encourage consumption growth, which will support prices. Rabobank says key variables to watch in the year ahead are U.S. dollar strength, uncertain Chinese demand growth, slowing biofuel demand, and oil price weakness.

Stefan Vogel, global head of Rabobank agri commodities markets research, said, “2015 will be another interesting year for agri commodities. Macro drivers remain very much in play and price swings from supply and demand shocks are still likely, given that the stocks for most commodities are not yet at levels necessary to provide an adequate buffer.”

Rabobank said that the United Kingdom and the United States are the bright spots for 2015, but their pace of expansion will be tempered by slow growth elsewhere.

Rabobank said farmer selling and planting decisions, global demand and weather related production risks remain key drivers through 2015. Assuming normal growing conditions, moderate increases in demand will allow stocks to build for most commodities through 2015.

However, the projected lower price levels through 2015 also provide a great incentive for consumption to exceed the forecast levels. In particular, China’s import demand will continue to be one of the most important variables for many commodity markets.

On the supply side, weather related production abnormalities will impact commodity prices. The weather in 2014 was somewhat of an anomaly for agri commodity production, with favorable to ideal growing season conditions experienced across most regions driving bumper crops across commodities. The only exception was persistent drought conditions across central and southeast Brazil and the east coast of Australia. Despite the higher beginning stocks in 2015, weather threats, including risk of a weak to moderate El Nino, could cause prices to diverge from our base case.

Rabobank’s 12-month outlook for prices from current levels include:

  • Live cattle – Bullish: Cattle futures are driven by tight supply and continued strong demand. The U.S. herd is expected to decline from 2 to 3 percent over the next year.
  • Corn – Neutral: Corn futures are expected to increase slightly through 2015, as widespread storage issues and declining acres will provide some support.
  • Soybeans – Neutral: Soybeans are expected top trade in a tighter range in 2015 as in other years, as global supply has added significantly to the U.S. harvest.
  • Soymeal – Neutral: Soymeal will trade below the high levels of the last two years, but will be supported by strong global demand.
  • Soyoil – Neutral: Soy oil futures are expected to move lower, or sideways, through 2015, with a bearish move toward the end of the year.
  • Lean hogs – Bearish: Lean hog futures are expected to ease in 2015, as U.S. pork production recovers with a 3 percent estimated production growth.

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