Rabobank, Media Release, 28 July 2021
Softs stole the show in July, as frost hit the heart of the Brazilian arabica coffee belt and also impacted sugar. The worst frost in 27 years led to ICE Arabica jumping by 27% and Robusta by 12% so far in July (coffee trees are very susceptible to frost damage), while sugar jumped 4.7%.
At the time of writing, another cold front is entering Brazil and will reach key coffee areas on Thursday and Friday. Elsewhere, weather has not been much kinder. Excessive rain and floods affected wheat quality in western Europe, while the ongoing hot weather and drought in North America worsened conditions for spring wheat, corn, and soybeans.
Further afield, there were flash floods in China and India. Usually, weather would return to normal after such extremes, but there is a 66% chance of another La Niña event by the end of the year. So normal weather, if we see it, may not last for long.
Wheat
CBOT Wheat forecast elevated on spring wheat weather woes as global supplies tighten
- Winter wheat harvest is progressing in both the US and Europe, but recent rainfall may lower protein.
- Global spring wheat crops continue to be in dire strait as drought expands across the globe.
Corn
Rabobank’s high Corn price outlook appears set to endure on extended supply constraints
- Rainfall appears too late to materially improve conditions or achieve the USDA’s yield expectations.
- Brazil ‘s harvest failure cuts export potential and burdens US export capacity for another year.
Soy complex
Rabobank bullish CBOT soy price has been met amid worsening US drought conditions
- US soy may have lost the upper hand for land, with stockpiles remaining extremely low for another year.
- CBOT soymeal and oil face headwinds from growing South American byproduct export competition.
Palm oil
Volatility in global soft oils complex prices will provide support to palm oil prices
- Malaysian 2021 palm oil production will potentially be lower year-on-year.
- Indonesian palm oil production is still expected to recover year-on-year in 2021.
Sugar
ICE #11 Sugar prices to be supported on a strong ethanol market and adverse weather
- ICE #11 prices moved between the Indian export parity and the Brazilian ethanol parity as expected.
- Frosts in Brazil pushed prices to a 4 year high. The damage is hard to assess, but will be less than coffee.
Coffee
Frost hits the heart of the coffee belt in Brazil
- A moderate frost has hit the arabica coffee belt, commercial shorts caught out aided the price spike.
- The full extent of the damage is still unknown, but estimates range from 2m bags to 6m bags off the potential of the 2022/23 crop.
Cocoa
Cocoa price forecast lowered in the short term amid better-than-expected availability
- Cocoa grindings in consuming regions breached pre-pandemic levels, bolstered by a decline at origin.
- Present availability high with exchange stocks showing few signs of net drawdowns.
Cotton
ICE#2 Dec21 Cotton marched higher, testing the USc 90/lb level
- Prices will likely remain supported for the next few months and be tested by the arrival of harvests.
- US cotton production appears to be in very good shape, having gone from a crop that was 41% in drought in March to 0% in drought as of July 20.
