by Agrimoney.com
US officials have been too optimistic in expectations for crop supplies given the array of weather setbacks, Rabobank has warned, lifting forecasts for prices of major crops as futures once again posted strong gains.
The bank's London analysts forecast inventories of all the major crops ending 2011-12 below estimates set last week by the US Department of Agriculture, whose data set the benchmarks on world markets.
However, they were particularly downbeat on prospects for cotton, for which it saw the important stocks-to-use ratio remaining at a historically-tight 36%, and wheat, for which it saw the USDA's world harvest forecast as nearly 12m tonnes too large.
The forecasts came as grain futures overcame early weakness to post further strong gains on Thursday, with Chicago wheat taking its gains in three sessions to $1 a bushel, and London and Paris contracts soaring more than 3%.
'Downgrades again'
Rabobank - noting the USDA's successions of cuts, totalling 24m tonnes, to hopes for the world wheat output in 2010-11 - said it expected "downgrades again this season" as wet weather holds back North American spring sowings, while winter wheat crops grapple with their worst crop ratings in 15 years.
And, besides the risk of further cuts to expectations for Europe's parched crops, the bank was also less upbeat on prospects for exports from the former Soviet Union – a sensitive point for markets given the region's price competitiveness.
"Production uncertainties aside, there remains significant policy risk clouding export forecasts for the Black Sea region," the bank said in a report, forecasting that no imminent return to "sizeable" Russian exports, and regional shipments of 23m tonnes in 2011-12, 3m tonnes below the USDA forecast.
The bank forecast Chicago wheat prices averaging $8.00 a bushel in the July-to-September quarter, easing to $7.50 a bushel in the first three months of 2012.
And premiums for wheat traded in Kansas, Minneapolis "and even" Paris should be supported by the particular setbacks facing higher-protein wheat crops.
'Stocks not replenished'
For cotton, the report forecast a continued decline in prices, but said the descent would be slowed by weather worries for crops in the US, the top exporter.
Indeed, while cotton is on for a record harvest in 2011-12, Rabobank's estimate of 203.6m tonnes was 3.5m tonnes short of the USDA estimate, with the bank also more upbeat on consumption too.
"Even with a record crop, global stocks are not expected to be replenished to average levels due to growing demand and three deficit season".
New York cotton prices were forecast easing to 120.00 cents a pound, on a near-term lot basis, from the 156.56 cents a pound that current spot contract, for July delivery, stood at on Thursday.
Ukraine upgrade
In other market news, Ukraine's deputy agriculture minister, Mykola Bezugly, forecast the country's grains harvest coming in "significantly higher" than 45m tonnes.
The farm ministry last month raised its harvest estimate to "up to" 45m tonnes, from 42m-43m tonnes.
And the United Arab Emirates bought 40,000 tonnes of wheat from Pakistan, which is seen as becoming a competitor in particular against Australia for Asian and Middle Eastern trade.
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