Corn represents a better bet than soybeans, for which currency moves offer a bigger dent to price prospects, Societe Generale said, sounding upbeat notes on cotton and – short term – on coffee too.
The bank issued a buy recommendation on Chicago corn futures, seeing them "trend into the low $4-a-bushel area by year-end", and average $4.12 a bushel in the first three months of 2016.
The forecast - which implies substantial scope for price recovery from levels on Thursday of $3.70 a bushel for December 2015 futures, and $3.81 a bushel for the March 2016 contract – reflected expectations that official expectations for the US crop are too large.
The bank said it had observed a "considerable amount of disease and nitrogen deficiency in the fields" in the eastern Corn Belt, where heavy rains earlier in the year leached out fertilizers.
"While the US corn crop looked considerably better in the western Corn Belt, we are sceptical that this will be enough to offset the damage in the east," SocGen analyst Chris Narayanan said.
"Furthermore, initial harvest reports from the US southern states suggest that yields are running below average."
Market debate
The comments come amid a heightened debate over US corn harvest prospects, ahead of a monthly US Department of Agriculture report on Friday which many observers see reducing estimates for yield and production.
Descartes Labs Infrared, a New Mexico-based analysis group that utilises largely satellite data, has, citing nitrogen deficiency, forecast a US corn crop as low as 13.3bn bushels, some 390m bushels below the current USDA estimate.
However, other observers have pointed to relatively stable crop ratings, as shown in weekly USDA condition reports, as cause to stick with current production ideas.
'Spectre of competition'
SocGen said that its expectations for corn prices were tempered somewhat by trade rivalry, with depreciating emerging market currencies, particularly the Brazilian real, raising "the spectre of competition for the US" on exports.
However, this was "far less concern" for corn, for which exports account for about 14% of demand for US supplies, than soybeans, for which the figure is 45%.
"We see a significant build in US soybean inventories during the 2015-16 marketing year," SocGen said, cutting forecasts for Chicago futures in the oilseed by up to $0.53 per bushel.
Indeed, the bank recommended that a long bet in December corn be hedged against a short holding in November soybeans, adding that US crop prospects for the oilseed appeared strong too.
'Threatening the crop'
SocGen issued a buy recommendation on New York-traded December cotton futures too, citing "some areas of concern" over Texas - the top US-producing state, which has been reported as showing a somewhat patchy crop - besides highlighting the weak monsoon rains in India.
"A disappointing Indian monsoon and increasing drought conditions in some areas are threatening the cotton crop there," the world's biggest cotton-producing nation.
The bank added that higher-quality cotton, of which the US is a particular supplier, "continues to be in short supply globally", despite strong world supplies of the fibre overall.
The USDA office in Beijing earlier this week highlighted that quality issues could protect US cotton exports from the worst of an expected import slump by China in 2015-16.
SocGen recommended buying December cotton futures at prices below 63 cents a pound, "as there is scope for a moderate recovery in prices to the top end of this year's 61-68 cents trading range on the improving fundamentals".
The December contract on Thursday stood at 63.55 cents a pound, up 1.0% on the day.
Surplus to deficit
The bank was also upbeat on prospects for New York arabica coffee futures, despite cutting its price forecasts by up to 25 cents a pound, with its estimates remaining above the futures curve.
"As global demand thus far has been stronger than expected, we expect prices to bottom in the October-to-December quarter, absent any additional deterioration to the Brazilian and/or Colombian economies or the general global macroeconomic picture," Mr Narayanan said.
(Brazil and Colombia are the two top arabica producing countries, where currency weakness has been seen as a major cause of a drop in coffee futures this year.)
The bank slashed to a 2.09m-bag deficit, from a 2.44m-bag surplus, its forecast for the world coffee production balance in 2014-15, which ends this month, while trimming its expectation for the surplus next season by 60,000 bags to 843,000 bags.
However, longer term, with prices remaining above the cost of output in Brazil, SocGen said this could lead to "increased production and lower prices in the longer term", and cut its prices for the year ahead by up to 15 cents a pound, seeing them average 132 cents a pound in 2020.
Wheat prospects
On wheat, SocGen maintained forecasts for Chicago soft red winter wheat prices a little above the futures curve, saying that whole world supplies were "comfortable", the recent sell-off had been "overdone".
However, it cut its forecast for prices of Kansas City-traded hard red winter wheat in the October-to-December quarter by $0.40 to $5.06 a bushel, citing a better-than-expected US harvest and "muted" export demand.
