Where are food commodity prices heading?

Posted by Daniel Palmer on 29th September 2009

The new international crop year begins 1 October and sugar is facing a global deficit, while corn, soybean and wheat prices may have a soft end to the year. If sugar prices rise too high, demand could temporarily weaken.

This month, the Rabobank Agri Commodities Monthly looks at the effects of global fundamentals, prices and gives an outlook for sugar, wheat, corn and soybeans.


* Deficit of 9 million tonnes expected for 2008/09 international crop year.
* Continuing concern regarding impact of a poor Indian monsoon on crop prospects.
* Threat that demand could weaken temporarily if prices rise too far.

The 2009/10 international crop year will begin 1 October, and the latest assessment of global sugar fundamentals points to another substantial sugar deficit for 2009/10, following a 10.4 million tonne deficit estimated for 2008/09. Current prices appear to be fully factoring in the view of the 2009/10 deficit.


* Seasonal conditions have been relatively favourable for Northern Hemisphere production.
* Australian production receiving rainfall but production risks remain.
* Further build‐up in world stock levels to keep prices on the defensive throughout the 2009/10 season.

Wheat prices are likely to see some further downside pressure over the short term, however a low in the market is expected to be reached within the next 50 cents. Moving into 2010 prices are likely to see some modest recovery as market focus shifts to be what is expected to be a significantly smaller world wheat crop in 2010, with farmers reducing their plantings and input applications based on lower returns.


* Low prices likely to encourage additional demand.
* Corn needs to gain acreage in 2010/11, which should support prices long term.
* Large U.S. new crop production.
* Estimates indicate 2009/10 ending stocks to be adequate.

Corn price movements will continue to be influenced by weather developments in the immediate future which will keep price volatility relatively high. The corn market should see some recovery into the first half of 2010 as the battle for acreage between corn and soybeans is likely to result in an appreciation of prices.


* Ongoing strong global demand.
* Increased reliance on U.S. export supplies to keep the U.S. new crop balance sheet tight.
* 2009/10 U.S. production forecast to be record large.
* Potential for large South American new crop plantings.

Soybean prices are likely to come under seasonal harvest pressure over the coming weeks as new crop supplies begin to fill depleted old crop pipelines. However, the world’s reliance on U.S. supplies should see demand remain robust into the new year, helping to support prices.