London, March 6 - Agricultural commodity prices look set to fall this year and then stabilise in 2010 although grain markets may rebound from recent lows, the Economist Intelligence Unit said on Thursday.
The EIU said weaker demand, ample supply, lower global trade levels and difficulties raising finance should keep prices at relatively low levels, projecting a 26.2 percent decline in its Food, Feedstuff and Beverages (FFB) index in 2009.
The FFB index was seen edging up by 2.8 percent in 2010.
The EIU said in a quarterly report that coffee prices are expected to fall in both 2009 and 2010 with the market set to remain in surplus.
Cocoa was expected to return to surplus in 2009/10 and weaker demand for chocolate confectionery, particularly in the developing world, suggested prices would fall, the EIU said.
Grains, however, were expected to recover from recent lows over the course of 2009 as it becomes clear that official policies will continue to support biofuel development.
"By 2010 smaller harvests and lower yields owing to less investment by cash-strapped farmers, coupled with already low stock levels, will combine to see (grain) prices move higher," the report said.
Sugar prices were seen rising moderately in 2009 and 2010.
"The (sugar) market is currently in deficit and demand from the ethanol sector is expected to support the price," the EIU said. Sugarcane is often used to produce ethanol in Brazil.
The EIU forecast oilseed prices would fall in 2009 with a more marginal decline anticipated in 2010.
"Palm oil is likely to suffer from a persistent build-up of stocks during 2008/09 and 2009/10. Stocks of rapeseed and rapeseed oil are also on the increase," the report said.