Commerzbank offered solace to wheat bulls, saying a European supply squeeze should revive prices from contract lows, and saw potential for gains in corn values too – but flagged soybean futures as poised for losses.

The bank stuck by a forecast for Chicago wheat futures averaging $4.50 a bushel in the October-to-December quarter, ahead of the level being priced into December futures, which stood at $4.32 ¼ a bushel in midday deals, recovering from a contract low of $4.28 a bushel set earlier.

And forecasts for prices next year were nudged higher by $0.20 a bushel, to $4.90 a bushel, again a level above that futures are currently suggesting.

For Paris wheat, although Commerzbank trimmed its quarter-average price outlooks typically by around $5 a tonne, the downgraded values also remained above the futures curve into late 2018.

Paris futures were seen averaging E170 a tonne in the last three months of this year – above the 153.25 a tonne at which the September lot was trading at, and the E160.25 a tonne being priced into December futures in late deals, after hitting a contract low of E158.50 a tonne.

'Greater need for imports'

Commerzbank acknowledged the pressure on prices from the likes of a record Russian harvest, saying that "the upside potential for wheat prices is likely to remain limited given the still plentiful global supply situation".

However, it said that the "supply that is available for export from Russia is likely to decline noticeably during the course of the year", as it has historically done, "with the result that wheat from the European Union and France in particular should be in higher demand again".

Yet EU export supplies will prove limited by rain setbacks to Germany's crop, and "worrying reports of heat-related damage in southern Europe", a region likely to have a "greater need for imports from other EU countries".

The bank flagged a European Commission forecast that EU wheat exports will rise by a modest 7% in 2017-18, recovering only a small part of the circa-25% slump last season, following rain-hurt French harvest.

"We expect wheat prices in Paris and in Chicago to increase moderately in 2018."

'Signs of a turnaround'

For corn too, the bank forecast price gains, despite trimmed by $0.10 a bushel, to $3.80 a bushel, its forecast for average spot Chicago futures prices in the October-to-December period.

This forecast remained above the $3.57 ½ a bushel that the December contract was trading at on Wednesday.

The market was showing "signs of a turnaround" thanks to expectations of a drop in global output n 2017-18, even factoring in ideas for the US crop which are better than had been thought.

"After several years of surplus… the coming year – 2017-18 – looks set to show a substantial supply deficit," which the US Department of Agriculture has forecast at nearly 28m tonnes.

"The looming marked supply deficit and the resulting noticeable reduction in global corn stocks, not to mention the lower supply available for exports coupled with record-high imports from the EU, suggest that the corn price will rise again."

'Price should weaken again'

However, for Chicago soybeans, Commerzbank downgraded its near-term price outlook below the futures curve, forecasting a retreat in values to average $9.25 a bushel in the last three months of the year, beneath the $9.37 ¾ a bushel being priced in to November futures.

"The prospect of another abundant and possibly even record supply in the US militates against any significant price recovery."

The USDA forecast world soybean stocks rising a further 800,000 tonnes to 97.8m tonnes in 2017-18.

"If expectations of renewed large crops in South America are confirmed when planting takes place in the fourth quarter, the price should weaken again, particularly since demand is at greater risk of missing market expectations than of exceeding them."

Cotton price prospects

For New York-traded cotton, Commerzbank also downgraded its forecast for average futures prices in the October-to-December period, by 3 cents to 68 cents a pound, although that was in line with the level that investors are already factoring in.

The bank noted expectations that world cotton output and demand will be "in balance in 2017-18, after two years of [production] deficits".

However, higher hopes for the US harvest are "likely to prevent any major price impetus in the short to medium term", and with futures only likely to show "only moderate upward movement next year".

Still, the 73 cents a pound at which futures were seen trading at in the last three months of 2018 was a little above the 68.31 cents a pound that the December 2018 contract was priced at.