Global staple food supplies are expected to face increased strain in 2024 as a result of adverse weather conditions, export restrictions, and higher biofuel mandates. Despite efforts by farmers worldwide to boost cereal and oilseed production in response to high food prices in recent years, consumers are anticipated to confront tighter supplies well into 2024.
Wheat, corn, and soybean prices, which have experienced robust gains over several years, are predicted to incur losses in 2023. The easing of bottlenecks in the Black Sea and concerns about a global recession contribute to this trend. However, analysts and traders caution that prices remain susceptible to supply shocks and food inflation in the upcoming year.
Ole Houe, Director of Advisory Services at agriculture brokerage IKON Commodities in Sydney, notes, “The supply picture for grains certainly improved in 2023 with bigger crops in some of the key places which matter. But we are not really out of the woods yet.” He highlights ongoing challenges, including the persisting El Nino weather phenomenon forecasted until at least April-May, potential decreases in corn production in Brazil, and unexpected large-volume purchases of wheat and corn by China from the international market.
The El Nino weather phenomenon, responsible for dry conditions in significant parts of Asia this year, is expected to continue in the first half of 2024. This poses a threat to supplies of rice, wheat, palm oil, and other farm products in some of the world’s leading agricultural exporters and importers.
Traders and officials foresee a decline in Asian rice production in the first half of 2024 due to dry planting conditions and shrinking reservoirs, which may reduce yields. The tightening of world rice supplies in the current year prompted India, the largest exporter globally, to impose restrictions on shipments.
While other grains markets experience devaluation, rice prices surged to their highest in 15 years in 2023, with quotations in some Asian export hubs witnessing gains of 40%-45%. India’s next wheat crop is also under threat due to a lack of moisture, potentially leading the world’s second-largest wheat consumer to seek imports for the first time in six years.
In Australia, the world’s second-largest wheat exporter, farmers could face challenges in planting their crop in dry soils come April. Intense heat in recent months has already curbed yields for this year’s crop, ending a three-year run of record harvests. This situation may prompt buyers, including China and Indonesia, to seek larger volumes of wheat from other exporters in North America, Europe, and the Black Sea region.
Commerzbank notes, “The (wheat) supply situation in the current 2023/24 crop year is likely to deteriorate compared to last season because exports from important producer countries are likely to be significantly lower.”
Despite these challenges, there is optimism for improved grain supplies in South America in 2024. Argentina anticipates increased production of soybeans, corn, and wheat, supported by abundant rainfall. Brazil, set for near-record farm output in 2024, faces some uncertainty due to erratic weather conditions, resulting in reduced soybean and corn production estimates in recent weeks.
Global palm oil production is expected to decrease next year due to dry El Nino weather, supporting cooking oil prices that declined more than 10% in 2023. This reduction in output aligns with expectations of higher demand for palm oil-based biodiesel and cooking oil.
CoBank, a leading lender to the U.S. agriculture sector, suggests, “We see more upside price risk than down.” They point to tight global grain and oilseed stock inventories, the potential impact of a strong El Nino weather pattern in the northern hemisphere, a declining dollar, and a return to long-term growth trends in global demand. As the world navigates these challenges, the outlook for staple food supplies remains a critical factor in global food security and economic stability.