El Nino, China Slowdown To Impact Asian Agri Commodities Next Year: Report

SINGAPORE, Nov 27 (Bernama) -- Volatility from the El Niño weather pattern and China’s economic slowdown could have the largest impacts on agri commodities in Asia next year, says Rabobank’s Agri Commodity Market Outlook for 2016 released Friday. The report titled ‘Bear with Grains, While Softs Lift Off’ predicts that as dry conditions linger into 2016 from one of the strongest El Niño events on record, this may constrain production of palm oil, sugar, coffee, and cocoa, and drive up prices. For palm oil, flat production could lead to stocks declining by 8.5 per cent in 2015/16 and increase prices by 10 per cent to average US$568 (RM2,420) per tonne. Stefan Vogel, Global Head of Rabobank, said, “Overall in 2016 globally, we will see grains continue to trade at around current price levels, and we expect some upside on soft commodities such as sugar and coffee." The report said the world sugar market will get more support than other soft commodities, with deficit production expected to be the new norm. It said India’s production is expected to contract by three cent y-o-y to 28.5 million tonnes, and if El Niño persists into 2016/17 Thai production will decline for the first time in five years. In coffee, Rabobank predicts a deficit in Robusta, with Indonesia forecast to reduce production from 12.5 million bags in 2015/16 to 10 million bags in 2016/17, although Vietnam will still see a significant increase to above 28 million bags in 2015/16, up from 26.5 million bags in the previous year. While 2016 palm oil prices will be supported by weather-constrained production, Rabobank expects competition from soy oil will prevent palm oil from rallying too high. At the same time, soy oil may see price support from a decrease in palm oil production. “Recovery of the Chinese hog industry is expected in 2016 and could result in China’s soybean imports to reach 81.5 million tonnes, up from 78 million tonnes in 2014/15, stimulating global trade,” said Vogel The US dollar is predicted to find additional strength throughout the year, while currency weakness in agri-producing regions will alter the competitiveness of production and trade flows, the report said. Netherlands-based Rabobank Group's operations include banking, asset management, leasing, insurance and real estate services, with an international focus on providing financial solutions to food and agribusiness companies and commodity traders. -- BERNAMA