5 issues to watch in grain markets in 2024

via Ben Buckner

The worldwide nature of grain markets means that anything from geopolitical confusion in grain-growing boxes to emerging climate threats can affect the supply of grain products in a given year. This year, there are five key factors that have the potential to explain the dynamics inside the grain markets.

1. Will Russia set a third consecutive record for wheat cuts in 2024?

When the Russia–Ukraine war began in 2022, the Russian wheat market became oversupplied and wheat was priced out of Ukraine and Russia to sell. The Dull Sea Grain Initiative ensured that exporters can maintain their inventories and stable costs through 2022 and 2023.

However, for the first year in two seasons, the elements in Russia are far from final and may reduce the amount of wheat that will be available for export. Vast parts of the important winter wheat growing regions of eastern Ukraine and southern Russia have received only 10%–30% of standard rainfall.

Global importers, particularly in the Middle East and North Africa, are now heavily dependent on cheap and available Russian supplies. The reduction in losses in Russia ends this bearish sentiment in the market since the summer season. Russian rain and temperatures will be important in May. Furthermore, the ECU Commission estimates that ECU soft wheat production will be reduced by 5 million tonnes in 2024 due to miscalculated area.

2. South American corn manufacturing shrouded in mystery

Brazil was the region’s largest maize exporter in 2023. In standard climate years, Argentina and Brazil account for 40% of the world industry, up from just 30% in 2010 and highlighting the nations’ growing advantage.

Often, the US Department of Agriculture (USDA) and South American companies (Conab, Brazil’s USDA alike, and the most important grain exchange in Argentina) correspond to their respective South American manufacturing projections throughout the spring months. Not so this year:

The USDA estimates Brazilian corn production to be 124 million bushels, the party CONAB in Brazil estimates production to be 111 million bushels. The USDA estimates corn production in Argentina at 55 million stacks, while the Buenos Aires Grain Exchange estimates production at 49.5 million stacks.

This mixed 18.5 million tonne spread is the difference between an adequately available world corn market and a relatively tight one. USDA numbers show major exporter corn shares as a percentage of intake – the main driving force of value – at a whopping 10.8%. Data from the South American company showed shares of the main exporter, corn, were down a steep 7.7%.

3. Los Angeles Nina and its impact on world climate patterns

Los Angeles The transition of Nina to El Nino has left large-scale producing countries in the Northern Hemisphere away from the main climate problems. The presence of El Niño during the summer months throughout the Northern Hemisphere is often good for rainfall patterns and grain turnover. Grain trading is highly linked to long-term mathematical characteristics in the US, Europe and the Dull Sea patch. This maintained concerns of supply problems generally absent in the market.

Alternatively, the return of Los Angeles Nina is approaching. The Los Angeles Niña has the most demanding conditions due to its rainfall patterns and turnover in the southern United States, increasing the potential for extreme heat across vast parts of the US agricultural belt. However, more than using simple Los Angeles Nina-based correlations, it is the rate at which the Los Angeles Nina arrives that provides a less qualified approach. The upcoming changes, expected to be up to speed on playgrounds by July, will likely be faster than usual.

Los Angeles Nina is worst for Argentina and southern Brazil. The 2023/24 South American growing season has ended, although taking into account long-term ocean temperature forecasts, the Los Angeles Niña will likely be available throughout December and January, which is strongly related to drought in Argentina. This will hinder growth given the overall low handovers needed to build global grain stocks.

4. Foreign money relations

US dollar strength correlates with bearish symptoms in major grain markets, and a new cycle of interest rate hikes continues to limit discretionary participation in ag sizes. It is also a way to buy energy elsewhere on Earth. A stronger US dollar means currency weakness in other countries. The Egyptian pound and Turkish lira are at all-time lows, and foreign exchange malaise in markets like Nigeria and China has, at the margin, slowed imports there.

Nations will import to maintain food supplies, although expansion in industry will likely be aimed at the value of the US dollar. With the possibility of a rate cut and a greater focus on US nationwide debt, the question in 2024 is whether or not the US dollar will continue to be energetic.

5. Mexico’s growing demand for imported ag goods

Mexico is projected to increase corn imports by 1.7 million tons, or 9%, year-on-year in 2023/24. U.S. corn exports to Mexico reached a total of 18.7 million bales in early April, up 4.8 million bales or 35% year-over-year. The catalyst for increased corn imports has been consecutive years of drought, which still level the playing field in key areas of Mexico’s winter corn manufacturing belt.

Even assuming record corn imports of 21.1 million tons, Mexico’s corn ending stocks on September 30, 2024 will total only 2.2 million tons – covering only 18 days of consumption. Parks As the region’s government importer, assuming flat Chinese demand for Mexico, AgriSource expects Mexican corn imports to increase from 2 million to a few million stacks each year for the next two to three years to increase inventories. . The US will likely be the government provider for Mexico, although Mexico’s desire for higher imports will contribute to the expansion of the overall world corn industry, increasing the burden on handover efficiency to the US, Brazil and Argentina.

In general, the confusion in the grain market in 2024 is attributed to climate change. We believe the market will readjust its assessment of the prospect on a weekly basis during the summer months.

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