Wheat futures will stay under $5 a bushel "for quite some time", Societe Generale said, in downbeat crop price forecasts, which ruled out a "significant rally" in coffee, and rated cotton among the few undervalued ags.
The bank - in a report which cut forecasts for the likes of cattle, soybean and coffee prices to levels below the futures curve – said that Chicago wheat prices would remain under pressure from a firm dollar, which would curtail a recovery in US exports.
"US exports will still be pressured by cheaper origins," SocGen said, pegging US shipments in 2016-17 at 775m bushels, well below the 850m bushels that US Department of Agriculture officials have pencilled in.
While the rouble is seen recovering against the dollar, cutting the competitiveness of Russian shipments, "the euro is expected to continue its weakness", the bank said.
'Stay below $5 a bushel'
Furthermore, forecasting a slightly stronger US yield this year than the USDA, SocGen estimated US inventories ending 2016-17 at 1.18bn bushels (32.1m tonnes), which would be a 29-year high.
"We forecast US inventories to remain more than ample in the foreseeable future, capping any significant price rallies," SocGen analyst Chris Narayanan said.
Chicago wheat futures, the world benchmark, "should stay below $5 a bushel for quite some time," the bank said, cutting its forecast for prices, on a quarter-average basis, by up to $0.25 a bushel to levels well below those investors are factoring in.
Futures in the first three months of next year, for instance, were seen averaging $4.34 a bushel compared with the $5.19 a bushel that March 2017 were trading at on Thursday.
And, on a year-average basis, they were forecast trading below $5 a bushel until 2019.
'Significant rally unlikely'
SocGen also made notable cuts to its forecast for New York arabica coffee prices, seeing by up to 13 cent a pound, now seeing them average 117.2 cents a pound in the last three months of 2016.
December futures were on Thursday trading at 138.65 cents a pound.
The price forecast came despite switching its forecast for the world production balance to a deficit of 1.0m bags, compared with a previous expectation of a 970,000-bag surplus.
The bank cited in part the poor performance of futures, "as the continued slide makes a significant rally unlikely absent any severe supply shock".
It also highlighted the revived output in Colombia, the second-ranked arabica-producing country, following a tree replanting campaign around the turn of the decade, although acknowledging that an imminent return to La Nina conditions would threaten the recovery, in often bringing unduly wet weather.
"Conversely, if El Niño were to persist into the June-August period, dry and warm weather would be seen in Colombia, helping flowering and providing more sunlight for the trees," Mr Narayanan said.
'No meaningful rally expected'
The bank, noting "excessively high" US soybean inventories, cut its estimates for Chicago futures in the oilseed too, by up to $0.30 a bushel, and forecast prices averaging $8.26 a bushel in the first three months of 2017.
March 2017 futures were trading at $9.17 ¼ a bushel.
And, while nudging higher estimates for corn futures, to levels within range of the current futures curve for the rest of 2016, it was cautious over prospects for a more meaningful recovery.
"Corn prices have, in our view, bottomed but no meaningful rally is expected," Mr Naryanan said.
Cotton was among the few ag contracts SocGen saw as undervalued – sticking by expectations of New York futures averaging 64.5 cents a pound in the last three months of 2016, ahead of the 58.05 cents a pound that December futures were priced at on Friday.
The bank acknowledged the threat to demand from enhanced competition from synthetic fibres, while releases from China's swollen state inventories could quell orders on the international market from the top consuming country.
However, while Chinese imports "are lower year on year, opportunistic buying has kept Chinese imports above average", Mr Narayanan said, adding that "questions remain regarding the quality" of the country's inventories
"We see the recent sell-off [in futures] below 60 cents a pound as overdone."