Rising food prices in the past few years have prompted farmers around the world to grow more grains and oilseeds. However, consumers are expected to face tight food supplies in 2024. That is due to the occurrence of the El Niño phenomenon, export restrictions, and increased biofuel commitments.
El Niño phenomenon
Analysts and traders stated that global prices for wheat, corn, and soybeans were heading for a decline in 2023. That comes after years of strong gains. The market is also facing fears of a global recession although prices remain vulnerable to supply shocks and food inflation in 2024.
The El Niño phenomenon, which has caused drought in large parts of Asia this year, is expected to continue into the first half of 2024. The phenomenon endangers supplies of rice, wheat, palm oil, and other agricultural products, which in turn affect food supplies and prices. It affects some of the world’s largest agricultural exporters and importers.
Rice production in Asia
Traders and officials expect rice production in Asia to decline in the first half of 2024. Farming conditions are dry and a decrease in the size of water reservoirs is likely to reduce production.
Indeed, world rice supplies have declined this year due to the impact of the El Niño phenomenon on production. This prompted India, the world’s largest rice exporter, to impose restrictions on its shipments.
Meanwhile, other grain markets are suffering from declining values. However, rice prices have risen to their highest levels in 15 years in 2023. Moreover, prices in some Asian export centers have increased by almost 40 percent to 45 percent.
India’s next wheat crop is threatened by a moisture shortage. This could force India, the world’s largest wheat consumer, to look for imports for the first time in six years.
By next April, farmers in Australia, the world’s second-largest wheat exporter, may start planting their crops in dry soil. That is after months of extreme heat that reduced production of this year’s crop. Rising temperatures also ended a series of record harvests for three consecutive seasons.
Grain shortage is likely to prompt buyers, including China and Indonesia, to look for larger quantities of wheat from other exporters in North America, Europe, and the Black Sea region.
On the bright side, corn, wheat, and soybean production in South America is expected to improve in 2024, although climate variability in Brazil raises some doubts.
In Argentina, one of the world’s largest grain-exporting countries, heavy rains in agricultural areas could boost the production of soybeans, corn, and wheat.
Meanwhile, Brazil has the potential to achieve near-record agricultural production in 2024. However, estimates of the country’s soybean and corn production have declined in recent weeks due to dry weather.
On the other hand, global palm oil production could decline next year due to the dry El Niño phenomenon. This decline supports cooking oil prices that witnessed a fall of more than 10 percent in 2023.
The decrease in production comes amid expectations of increased demand for the production of biofuels that are based on palm oil and cooking oil.
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