CORN and soybeans are among agricultural resources that may do better than other commodities as developed economies head into recession, an analyst said on Friday.
"The agricultural markets are going to outperform other commodities in coming years, particularly corn and soybeans," Lawrence Eagles, head of commodities research with JP Morgan, said during the company's 2009 outlook conference call.
These resources are not as affected by GDP fluctuations as some other commodities, he said.
For corn, there isn't likely to be "any kind of policy u-turn" in government ethanol strategy and the US Department of Agriculture's conservation reserve program, he said. The CRP program allows farmers to set aside environmentally sensitive land and the USDA pays them a subsidy to not grow crops on it.
Risks remain to the upside in soybeans as export data remain supportive, Brazilian supply is unlikely to grow and the government biodiesel mandate remains.
Further, there is always weather risk.
The supply side for wheat remains more responsive to price changes, and prices are now too low to see another record crop year.
This could lead to a year of near-term price stability, but as 2009 progresses, upside risks will increase.
Meanwhile, sugar could enter a "more constructive phase" in 2009 with a smaller Indian 2009-2010 crop and "a reasonable supply deficit," he said.
But he warned about not getting "too bullish" on the sweet stuff.
Although, many commodities are likely to face pressure, he said he wasn't excessively bearish on cocoa as chocolate consumption holds up relatively well in times of global economic downturn.
While there is some demand response, chocolate has a "feel-good factor" that may keep people consuming it even as they forego eating out.
Matt Whittaker, Dow Jones Newswires