Inside Citi’s 2013 Agriculture Outlook

As 2012 comes to a close, Wall Street begins to look ahead to the coming year and what trends will have the biggest impact on the commodity world. Financial behemoth Citigroup Inc. (NYSE:C) recently came out with an all-encompassing forecast for the next two years for almost every major commodity. Of particular interest was their outlook on ags, as these commodities have been on a wild ride for 2012; one of the hottest summers on record and an extended drought sent futures all over the board [for more agricultural news and analysis subscribe to our free newsletter].

Citigroup Inc (NYSE:C)

Corn to Stagnate

This yellow commodity has been a favorite for traders around the industry given its laundry list of uses in our everyday lives. After this year’s less-than-optimal crop yields, corn prices surged more than 20% on the year, with the bulk of those gains coming in the summer months. Citi sees high prices holding for the first half of 2013, as there will be a lower demand for livestock feed because of smaller populations as a result of the drought. From there, the institution is predicting record planting for the rest of 2013 and 2014, which will bring prices down to a more normal level.

Wheat Will Rise

This major grain averaged $7.60/bushel this year, and Citi sees that rising to $8.60 for 2013 and cooling down to $7.75 the year after. “While the issues for the major row crops have been local and centered about the U.S. farm-belt, the buoyancy of wheat is a global phenomenon driven by disappointing production outlook and export availabilities in the Black Sea, Australia and Argentina,” Citi commented [see also The Surging Demographic Trends Behind Grain Investing].