World commodity prices should fall in both 2006 and 2007 with market surpluses seen developing in beverage, oilseed, sugar and industrial raw material markets, the Economist Intelligence Unit (EIU) said on Monday.
The EIU said its World Commodity Forecasts (WCF) index would climb by 1.9 percent this year but slip by 4.8 percent in 2006 and 4.2 percent in 2007.
The WCF is an index of 24 hard and soft commodities.
"In 2006, a tighter grains market will be unable to offset bearish trends in many of the other commodities," the EIU said.
The EIU forecast the food, feedstuffs and beverages (FFB) index would drop by 1.0 percent this year, 3.6 percent in 2006 and 0.7 percent in 2007.
The FFB is an index of 15 soft commodities.
A rising Industrial Raw Materials (IRM) index fuelled the modest rise in the WCF index this year.
"The IRM index will gradually decline in 2006 and 2007 as markets move into surplus, dragging the WCF index down with it," the report said.
Oilseeds were among the weakest soft commodity markets with a price fall of 10.3 percent seen in 2005, a drop of 7.9 percent in 2006 and 1.8 percent in 2007.
"Large carryover stocks (of oilseeds) will continue to depress prices in 2006 and 2007," the report said.
Crop shortfalls for coffee and cocoa are expected to help boost the beverage index by nearly 19 percent this year but drops of 13.5 percent and 9.2 percent were anticipated in 2006 and 2007 respectively.
The EIU said the outlook in coffee had "turned more bearish in anticipation of a return to global over-supply" while an expansion of production in many cocoa-producing countries will put increased downward pressure on prices.