London, 27 September 2011

Commerzbank C&M: Coffee, cocoa and sugar prices have not been able to maintain the record highs they achieved this spring. Deteriorating global economic conditions have played their part in this, as has a changed view of fundamentals on the softs markets. That said, prices on all three markets can be expected for the foreseeable future to remain at a high level and show significant volatility.

Coffee: We expect the information on the now expiring low-yield harvest in Brazil to be already digested. Overall, the upside pricing pressure should be exhausted. For the fourth quarter, we anticipate a price of 250 US cents per pound for Arabica and 2100 USD a ton for Robusta. The times of cheap coffee are probably over, though, also in the longer term, not least because the demand in producing countries themselves is particularly strong.

Cocoa: As global demand has been raised only slightly compared to the former estimate, the ICCO now expects a global market surplus of 325 thousand tons instead of previously 187 thousand tons. The price of cocoa does look impressed by these developments and is trading below the USD 2,700 a ton mark. Given the uncertainty with regard to the next crop year we expect prices to average USD 2,700 per ton in Q4 and only rise to USD 2,900 by the end of 2012, which is USD 300 and USD 200 less than our previous forecasts, respectively.

Sugar: Due to drought and frost, Brazilian sugar industry association UNICA has once again lowered its sugar cane crop forecast in the key Center-South region. We expect prices to remain rather high, especially as uncertainties regarding productivity and weather conditions are not likely to end. We expect to see a price of 27 US cents per pound for the fourth quarter and an annual average of 25 US cents per pound in 2012.

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