① The main grain market will face a tight supply situation in 2024. Some industry sources have analyzed that it has not actually come out of trouble; ② The dry weather brought about by El Niño will be a major adverse factor in food supply. In addition, factors such as export restrictions and higher demand for biofuels will also disrupt food supply; ③ Traders expect Asian rice production to decline in the first half of next year.
Financial Services, December 27 (Editor: Zhou Ziyi) In recent years, although high food prices have prompted global farmers to grow more grains and oilseeds, consumers will face tight supply in 2024 due to unfavorable weather, export restrictions, and higher demand for biofuels.
Analysts and traders all said that after several years of strong increases, global wheat, corn and soybean prices finally began to fall in 2023 due to the easing of supply bottlenecks in the Black Sea and concerns about a global recession. Despite this, supply shocks are still a problem in the new year.
Ole Houe, head of consulting services at agricultural brokerage firm IKON Commodities in Sydney, said, “The food supply situation improved in 2023, and food production increased in some key regions. But we haven't really come out of trouble yet.”
“The expected El Niño climate will last at least from April to May, when Brazil will almost certainly reduce corn production.”
The impact of El Niño
This year's El Niño weather phenomenon brought droughts to most parts of Asia. The weather is expected to continue in the first half of 2024, putting the supply of rice, wheat, palm oil, and other agricultural products at risk in some of the world's largest importers and exporters of agricultural products.
Traders expect that due to arid growing conditions and shrinking reservoir water, grain production may decrease, and rice production in Asia is expected to decline in the first half of 2024.
In fact, global rice supply has begun to tighten this year, and the reduction in rice production caused by El Niño has prompted India, the world's largest exporter of rice so far, to restrict rice exports.
At a time when market prices for other grains are showing a downward trend, the price of rice rebounded to the highest level in 15 years in 2023, and prices in some Asian export centers rose 40%-45%.
Furthermore, wheat crops are also being threatened by water shortages. Months of heat have curtailed wheat production in Australia, the world's second-largest wheat exporter, this year. Next April, the country's farmers are likely to grow wheat on dry soil.
This may prompt buyers, including China and Indonesia, to choose to import larger quantities of wheat from other exporters in North America, Europe, and the Black Sea region.
Commerzbank commented in a report, “Compared to last year, the (wheat) situation may worsen in 2023/24. This is because exports from important producers are likely to drop significantly.”
Meanwhile, the arid El Niño weather may cause global palm oil production to drop next year.
At a time of potential decline in production, demand for palm oil-based biodiesel and cooking oil is expected to increase.
CoBank, the main lender to the US agricultural sector, said, “We see that the risk of rising palm oil prices outweighs the downside risk.”