SINGAPORE: Drought or too much rain, the war in Ukraine and high energy prices look set to hamper global agricultural output again next year, tightening supplies, even as higher prices encourage farmers to plant. Encourages.
At least through the first half of 2023, production of staples such as rice and wheat is unlikely to replenish depleted inventories, while edible oil-producing crops are vulnerable to adverse weather in Latin America and Southeast Asia.
“The world needs record crops to meet demand. In 2023, we need to do even better than we did this year,” said Ollie Hugh, director of advisory services at agriculture brokerage IKON Commodities in Sydney.
“At this stage, if we look at the prospects for global production of grains and oilseeds, it looks very unlikely.”
Wheat, corn and palm oil futures have fallen from record or multi-year highs, but prices in the retail market remain high and tight supply is forecast to support prices in 2023.
Why it matters
With food prices hitting record highs this year, millions of people around the world are struggling, especially in poor countries in Africa and Asia that are already facing hunger and malnutrition.
Food import costs are already set to reach a record $2 trillion in 2022, forcing poor countries to cut consumption.
Benchmark Chicago wheat futures hit a March high of $13.64 a bushel after Russia’s attack on key grain exporter Ukraine cut supplies in a market already reeling from adverse weather and post-pandemic restrictions. .
Corn and soybeans rose to their highest levels in a decade, while prices for Malaysia’s benchmark crude palm oil hit a record high in March.
Wheat prices have fallen to pre-war levels and palm oil is about 40 percent of its value amid fears of a global recession, China’s COVID-19 sanctions and an extension of the Black Sea Corridor agreement for Ukrainian grain exports. is lost
What does this mean for 2023?
While floods in Australia, the world’s second-largest wheat exporter, have caused widespread damage in recent weeks to crops that were ready for harvest, severe drought has shrunk Argentina’s wheat crop by nearly 40 percent. is expected.
This will reduce global wheat availability in the first half of 2023.
A lack of rain in the U.S. Plains, where winter crop ratings are the lowest since 2012, could reduce supplies in the second half of the year.
For rice, prices will remain high as long as export tariffs imposed by India, the world’s largest supplier, earlier this year remain in place, traders said.
“Availability of rice is quite thin in most exporting countries except India, but export duty is imposed on it to reduce sales,” said a Singapore-based trader at an international trading company.
“If we get a productivity shock in any of the top exporting or importing counties, that could really swing the market upside down.”
The outlook for corn and soybeans in South America looks bright for its harvest as early as 2023, although recent droughts in parts of Brazil, the world’s top bean exporter, have raised concerns. is given
According to the U.S. Department of Agriculture, U.S. domestic supplies of major crops including corn, soybeans and wheat are expected to remain low through 2023.
The agency is forecasting that US corn supplies will fall to a decade low ahead of the 2023 harvest, while soybean stocks were seen at a seven-year low and wheat stocks are expected to run out. GoI is lowest in 15 years.
Palm oil, the world’s most widely used edible oil, has been hit by tropical storms in Southeast Asia where low fertilizer use has led to high prices.
Still, high grain and grain prices have encouraged farmers to plant more crops in some countries, including India, China and Brazil.
“Planting is high in many countries but production is expected to remain low due to adverse weather and other factors,” Olay said. “Production is not sufficient to replenish supplies that have been reduced.”
