Rabobank lifted arabica coffee, cocoa and sugar price forecasts, but to levels below the futures curve, casting doubts on the sustainability of rallies in soybean and wheat futures too.
The bank, which two weeks ago signalled that mixed results of a Brazil crop tour might prompt it to lift its forecast for coffee futures, on Thursday raised forecasts across the curve for both arabica and robusta prices.
"We remain particularly bullish in robustas," Rabobank said, adding that that it is "hard to overstate the drought seen in Espirito Santo", the top Brazilian state for producing the variety.
However, its upgraded price forecasts for London-traded robustas by up to $40 a tonne to, for example, an average of $1,600 a tonne for the last three months of the year, were only modestly higher than futures were trading at, with the November contract priced on Thursday at $1,590 a tonne.
"Large certified stocks of robustas will dampen any rally," the bank said, citing pressure on prices from inventories held for delivery against London derivatives.
And for arabica futures - for which Rabobank lifted its price estimates by up to 11 cents a pound, to 133 cents a pound for the October-to-December quarter the forecasts were a little below the futures curve, with December futures trading at 138.25 cents a pound.
The bank flagged the potential for an upgrade to its estimate for the Brazilian arabica harvest, although noted the need for "more rain" in Colombia, where dryness has sapped output growth.
In New York-traded raw sugar, Rabobank lifted its forecast for prices in the April-to-June and July-to-September quarters by 0.5 cents a pound, to 15.5 cents a pound and 15.0 cents a pound respectively levels comfortably below the futures curve.
"Fundamentals are increasingly supportive," the bank said, citing dents from El Nino-related weather upsets to output in a number of countries, and raising by 1.9m tonnes to 6.8m tonnes its forecast for the world sugar production deficit in 2015-16.
However, the bank flagged too the prospect of a 10% rise, to 34m tonnes, in sugar output from Brazil's key Centre South region in the forthcoming crushing season, which starts next month, adding that futures will "be pressured as exports flow".
European Union sugar beet sowings are expected to rise by 1.5m acres, fostering growth of 10-18% in production, to 17m-18m tonnes.
And while the forecast for cocoa futures was lifted too, reflecting "low mid-crops in West Africa after a very severe" episode of the Harmattan wind, the estimate for prices ending the year at about $2,850 a tonne was some $100 a tonne below New York's December contract.
"We remain bearish going forward," the bank said, flagging "good global supply", at a time when some demand signs are poor, with sales of Easter bunnies in Germany, for instance, down 6% year on year, according to BDSI.
'Aggressive export competition'
For soybeans and wheat, Rabobank stuck, largely, by previous price expectations, leaving its forecasts for the oilseed especially - below market levels raised by recent rallies.
For wheat - for which the bank forecast Chicago prices at about $4.75 a bushel in a year's time, compared with the $5.10 ¾ a bushel being priced in by March 2017 futures - said that US weather setbacks were "not yet threatening to yields".
Meanwhile, "heavy inventories, ongoing aggressive export competition, plus a projection for continued building of US 2016-17 stocks should cap rallies".
The bank was closer to the futures curve on estimates for Paris wheat futures, which it said appeared "very good value" compared with Chicago values.
And, in Chicago soybeans, Rabobank forecast prices moving lower again" after the key US Department of Agriculture report on US sowings due next week, which it forecast showing a rise of 1m acres year on year in plantings of the oilseed.
Extra pressure on prices will come from the "two South American soybean powerhouses", Argentina and Brazil, which are "anticipated to compete heavily for international trade market share", helped by weak currencies, improved infrastructure and the low costs of global shipping.
'Risk of short-covering rally'
Cotton was one agricultural commodity that the bank did see holding "bullish" potential, with New York-traded futures "oversold", and global stocks of the fibre in exporting countries at a six-year low.
"This market structure presents a supportive price outlook," Rabobank said, adding that the "risks of a short-covering rally are building", given the large net short position held by speculators in New York cotton futures and options.
Prices were forecast standing at 70 cents a pound in a year's time, well above the 58.45 cents a pound being priced in by March 2017 futures.