In the dynamic landscape of the global grain industry, 2024 unfolds a complex tableau for the grain market, offering a mix of opportunities and challenges. This article delves into the intricacies of supply and demand dynamics, climate-related challenges and trade patterns, offering a comprehensive exploration of the key factors shaping the global grain market.
The global grain outlook for 2024 is expected to be characterized by both opportunities and challenges. As the world population continues to grow, reaching an estimated 8.5 billion by 2030, the demand for grains, particularly staple crops like wheat, rice, soybeans and corn, is projected to increase significantly.
By 2050, there is a forecast of a 70% increase in global demand for food and a doubling in demand for energy and all this growth will come from grain production on agricultural land which, therefore, must be intensified.
The dynamics of demand for grains are constantly changing on the global stage, driven by a complex intersection of factors that shape both consumption and trade in these agricultural commodities. Some of the influences are:
The growing demand for biofuels, especially corn ethanol, which has boosted the production and consumption of grains such as corn, soybeans, and sugar cane.
The recovery of Chinese demand for soybeans, after the health crisis that affected its pig herd in 2019 and 2020. China is the world’s largest importer of soybeans and has increased its purchases from Brazil, the world’s largest producer of the oilseed. We should expect a potential reduction in demand attributed to China, the country responsible for importing close to 90% of Brazil’s soybean production.
The scenarios for grain prices in the next fiscal year are under the influence of a series of factors, whose impacts can vary between positive and negative on the prices of agricultural commodities. Among these determinants, it is essential to consider:
The dynamics of global supply and demand are intricately linked to production, consumption and stock conditions in the main grain-producing and importing countries. The supply, subject to variables such as climatic, sanitary, and logistical factors, among others, has the capacity to be reduced or expanded in the market. Demand, in turn, is sensitive to economic, political, and social factors, among others, and can stimulate or discourage grain consumption in different segments. The interrelationship between supply and demand, crucial in determining market balance or imbalance, has a direct influence on grain prices.
In addition to the above, we will have a year of 2024 with challenges, but none of them will be new to players in the commodities market. Climate issues, oil prices, global demand and China’s positioning are enough to affect and reflect on prices worldwide.
For today we have: Argentina with the promise of a better harvest, the US recovering corn production but with a decline in soybeans, and Brazil with its opposite positions, less corn, and more soybeans for 2024., China with a slight decline in demand for food, which could translate into falling prices and reduced margins.
Climate issues that hurt Argentina’s last harvest seem to have changed direction, giving abundant rainfall over farming heartlands is likely to boost production of soybeans, corn, and wheat in one of the world’s largest grain exporting nations.
According to Argentina’s Rosario Grains Exchange (BCR), 95% of early planted corn and 75% of soybeans are in “excellent to very good” conditions, thanks to rains since the end of October across the country’s Pampas region.
According to the twelfth Conab field research, it was observed and confirmed the record production already predicted in previous research, and indicate production at 322.8 million tons, corresponding to a growth of 18.4% or 50.1 million tons about the previous season.
This result is 0.8% higher than the forecast in the previous survey, released in August, mainly due to the advance in the second corn harvest, which has been presenting higher productivity than initially foreseen, combined with the better performance of wheat and sorghum crops.
The planted area, estimated at 78.5 million hectares, is 5.3% or 3.9 million hectares higher than that sown in 2021/22. The largest increases are observed in soybeans, with an increase of 2.58 million hectares or 6.2%; in corn, with an increase of 686.8 thousand hectares or 3.2%; and in wheat, with an increase of 364.3 thousand hectares or 11.8%.
The 2022/23 harvest in Brazil reached 154,617.4 thousand tons, 1.5% higher than the first harvest estimate made by Conab, in October 2022, and 10.9% higher than the production record achieved in the 2020/21 harvest. These results occurred due to the excellent weather conditions in most of the producing regions, except for Rio Grande do Sul, and the high technology used by producers.
The productivity achieved reflected the favorable conditions occurring in the main producing regions. Rio Grande do Sul had a negative highlight in this harvest because of La Niña, which despite being moderate in intensity, caused a drop in productivity in most states. However, the record productivity recorded in several states, with emphasis on the Matopiba and Mato Grosso, compensated, with surplus, the losses recorded in the South.
In this harvest, Brazil sowed 44,075.6 thousand hectares, 6.2% higher than the previous harvest, with an average productivity of 3,508 kg/ha, recording historical records of planting area, productivity, and production.
The climatic conditions were beneficial to the development of the culture in most producing regions in Brazil. Despite the drop in productivity, in relation to the initial estimates, which occurred in Rio Grande do Sul because of La Niña, well-distributed rainfall, combined with the investment of producers, provided similar or higher productivity compared to the last harvest in all states, even in Rio Grande do Sul.
The sown area of the first corn harvest was 4,444 thousand hectares, 2.3% lower than the last harvest, but with a production of 27,373.2 thousand tons, 9.4% higher than that obtained in the 2021/22 harvest, demonstrating the impact of the climate more favorable and productive efficiency in the sector.
2023 was a busy year in Brazilian ports with record exports of commodities, mainly soybeans and corn. Comparing the same period from January to December, Brazil exported a total of 108.8 million tons of soybeans in 2023, compared to 87.5 million in 2022, while corn exported 42.6 million tons compared to 37.9 million in 2022.
Once again Brazil surprises and takes part of the United States corn market, this time supplying Japan. Brazil’s corn exports to Japan surpassed the United States in overall volume in 2022/23, with Japan importing 6.9 million tons of corn from Brazil. In contrast, U.S. exports to Japan dropped to just under 6.9 million tons, a nearly 2.9 million ton drop year over year. Over the past 4 years, Japan ranked as the fourth-largest corn importer in the world. In dollar terms, U.S. corn trade to Japan is worth around $2.4 billion on average, around 20 percent of the value of U.S. corn exports to the world each year.
As mentioned in several of my speeches, we need to change focus and think outside the box, Brazil is huge and has a lot of unexplored area that can alleviate much of our logistics, not only in road and rail modes but also in the expansion of ports in the northern side of the country.
Recently, an investment of around R$1.6 billion was announced in the port of Itaqui, in São Luís, to increase the port’s capacity by more than 8 million tons. This will benefit the MAPITO region and part of the Midwest. Another recently announced project is Porto Paratudal in Cáceres, Mato Grosso, scheduled for delivery in 2026, and will connect Mato Grosso to the Paraguay-Paraná waterways and the La Plata Basin in Argentina. These two projects join many other projects in different stages of maturity, both in Arco Sul and Arco Norte, to meet export demand in the coming years.
We have frequently seen an exaggerated number of waiting time in southern ports, the port of Paranagua recorded up to 93 days in the last week of the year, and Santos with maximum of 37 days.
Potential Decrease in 2024 Grain Harvest vs. 2023
According to the second forecast of the Agricultural Production Survey, recently released by IBGE, the Brazilian harvest of grains, cereals and legumes is expected to total 306.2 million tons in 2024. This production represents declines of 0.7% in relation to the first estimate made in October, and 3.2% (or 10.1 million tons) compared to the 2023 harvest.
Growth of 2.8% in the forecast area and production estimated at 160.2 million tons. Plans are underway, with the highest percentages observed in the Central-West states, with 98.7% completed in Mato Grosso, 96% in Paraná and 95% in São Paulo.
As in 2022/23, Brazil is expected to maintain its productivity record for the 2023/24 harvest under conditions of tight margins. The recovery of the Argentine harvest, the reduction in productivity in the United States and the slight retraction in Chinese demand make up the scenario. Even so, we hope to maintain the levels of soybean exports to China, which represents 40% of Brazilian shipments. Soybean producers should expect challenging prices in the seesaw between the summer harvest, second harvest and the international scenario.
Reduction of 5.3% in the total area to be cultivated (first, second and third harvests), estimated at 21.1 million hectares, with a forecast of 118.5 million tons.
The current harvest for 2023 is currently underway with an estimated production volume of 8.1 million tonnes. This marks a 22.8% reduction from the previous harvest, a decrease attributed to adverse weather conditions and excessive rainfall experienced during the crop’s developmental stages.
KEY FACTORS INFLUENCING THE GRAIN MARKET
Climate Changes: Weather plays a crucial role in grain production. Factors such as rainfall, temperature, and drought can significantly impact crop yields.
Government Policies: The supply chain and prices of the grain market can be impacted by government laws such as trade policies, import/export rules, and safety guidelines.
Global demand: The demand for grain products, including food, animal feed, and biofuels, is a critical factor in the grain industry. Fluctuations in demand can influence prices and trade patterns.
Market Competition: As businesses compete for market share the level of competition in the grain market may have an impact on the cost and availability of grain products.
Energy Prices: The prices of oil and other energy sources can impact the demand for biofuels, which are often made from grains.
Economic Factors: Economic factors, such as inflation, interest rates, and currency rates, can have an impact on the pricing as well as the general demand for grain-based products.
RISK ASSESSMENT FOR THE GLOBAL GRAIN TRADE
Price volatility: Uncertainty in grain production due to climate change can lead to tremendous price volatility.
Disruptions in supply chains: Extreme weather events can disrupt supply chains, making it difficult to transport grains from where they are grown to where they are needed.
Trade barriers: In response to these disruptions, some countries or groups of countries might impose trade barriers like export restrictions or quotas to safeguard their domestic food security.
Relocation of production: As climate conditions shift, some regions may become less suitable for grain production while others become more favorable.
In conclusion, the global grain outlook for 2024 presents both opportunities and challenges. Meeting the increasing demand for grains will require significant efforts to boost production, improve agricultural practices, and adapt to climate change. Addressing resource scarcity, managing trade policies, and promoting sustainable farming methods will be crucial for ensuring food security and maintaining stable grain markets worldwide.
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