High agricultural prices in recent years have prompted farmers around the world to plant more grains and oilseeds. However, the impact of El Nino, coupled with export restrictions in some countries and continued growth in biofuel demand, suggests that consumers could face a tight supply situation in 2024.
After strong gains in global wheat, corn and soyabean prices over the past few years, 2023 has seen a marked decline as Black Sea logistics bottlenecks ease and the prospect of a global recession worries, analysts and traders said. In 2024, however, prices remain vulnerable to supply shocks and food inflation. Ole Howie says grain supplies will improve in 2023 as some major producing areas increase production, but are not really out of the woods yet. With weather agencies predicting El Nino to last at least until April or May next year, Brazilian corn is almost certain to fall, and China is buying more wheat and corn from the international market.
The El Nino weather pattern, which has brought dry weather to much of Asia this year and could last until the first half of 2024, means some major exporters and importers face supply risks for rice, wheat, palm oil and other agricultural commodities.
Traders and officials expect Asian rice production to fall in the first half of 2024, as dry planting conditions and reduced water storage in reservoirs could lead to lower yields. Global rice supplies were already tight this year after El Nino reduced production and prompted India, the world’s top exporter, to restrict exports. Even as other grains fell, rice prices rebounded to 15-year highs last week, with prices quoted by some Asian exporters up 40-45 per cent.
In India, the world’s second-largest wheat producer, the next wheat crop is also under threat from a lack of rainfall that could force India to seek imports for the first time in six years as state stockpiles of wheat have fallen to their lowest level in seven years.
In Australia, the world’s second-largest wheat exporter, months of hot weather have damaged yields this year, ending a three-year streak of record yields. Australian farmers are likely to sow wheat in dry soil next April. The loss of wheat in Australia could prompt buyers such as China and Indonesia to seek more wheat from North America, Europe and the Black Sea. Commerzbank believes the wheat supply situation could worsen in 2023/24, as export supplies from major producing countries could be significantly reduced.
The bright spot for 2024 is higher corn, wheat and soybean production forecasts in South America, although weather in Brazil remains a concern. Good rainfall in Argentina’s major agricultural producing areas helped boost soybean, corn and wheat yields. Due to continuous rainfall in the Pambas grasslands since the end of October, 95 percent of the early-planted corn and 75 percent of the soybean crop are rated excellent. In Brazil, 2024 crops are on track to be near record levels, though the country’s soybean and corn production forecasts have been cut in recent weeks due to dry weather.
Global palm oil production is also likely to decline due to dry weather brought on by El Nino, supporting edible oil prices. Palm oil prices are down more than 6% so far in 2023. While palm oil production is declining, demand for palm oil is growing in the biodiesel and food industries.
From a historical perspective, global grain and oilseed inventories are tight, the Northern Hemisphere is likely to see a strong El Nino weather pattern during the growing season for the first time since 2015, the U.S. dollar should continue its recent decline, while global demand should resume its long-term growth trend.
Post time: Mar-18-2024