Posted on October, 26, 2022 at 09:22 am
Global grains and oilseeds prices are unlikely to return to the pre-Covid-19 and pre-war levels anytime soon due to current production levels, according to Agricultural Business Chamber chief economist Wandile Sihlobo.
Overall, the 2022/23 global grain and oilseed season presented an encouraging picture of supplies.
“Still, the price moves of the commodities will likely differ in the coming months because of the variations in the production levels compared with the 2021/22 season. The current forecasts will probably be sufficient to provide relief from the levels the prices were at in the weeks after the start of the Russia-Ukraine war,” Sihlobo said.
Agbiz said as the 2022/23 summer crop season began in the Southern Hemisphere, the grains and oilseeds production estimates released by the International Grains Council (IGC) and the US Department of Agriculture would increasingly incorporate more information on underlying developments at farms.
As usual, he said, these organisations would update their monthly projections to mirror conditions on the ground, compared to the past few months, when the forecasts relied on historical production figures.
This as the IGC maintained a broadly optimistic view of the 2022/23 global grains and oilseeds production, estimated at 2.26 billion tons. This harvest was only 1% lower than the 2021/22 season, but still the second-largest crop on record.
Sihlobo said notably, production conditions differed among various crops. For example, the 2022/23 global maize production was estimated at 1.17 billion tons, down by 4% year-on-year. This decline was on the back of an expected smaller crop in the US, Ukraine, EU and India. The US and the EU experienced drought and heatwaves during the summer, damaging crops in some regions.
Meanwhile, India received heavy rains these past few months, leading to poor yields in some regions. Ukraine was still at war with Russia, which had reduced activity in the fields. The decline in these countries overshadowed the relatively good crop in China, Brazil, Russia, Argentina and South Africa.
The IGC forecast South Africa’s 2022/23 maize harvest at 15.7 million tons, which was unchanged from their previous season estimate.
This expected decline in global maize production was at a time when consumption is also falling mildly. Consequently, the 2022/23 global maize stocks were estimated at 258 million tons, down by 8% year on year.
Such data would likely keep global maize prices at relatively elevated levels in the coming months, although lower than in the months following Russia’s invasion of Ukraine.
Sihlobo said South Africa was interlinked with the global market and would likely also see higher maize prices in the foreseeable future, despite the optimistic forecasts of the domestic harvest. This meant that consumers and the livestock industry might not receive much relief on maize prices as some might have anticipated.
“These are still early days and the data will be reviewed as the season unfolds in the Southern Hemisphere.”
Meanwhile, wheat’s 2022/23 global harvest was estimated at a new high of 792 million tons, up by 1% year on year (y/y). This improvement was supported by expected large yields in Russia, the US, Canada, Kazakhstan, China, Turkey and the UK.
The large harvest in these countries had overshadowed the expected decline in the harvest in the EU, Australia, Ukraine, Argentina, and India. The IGC forecasts 2022/23 global wheat stocks at 286 million tons, up by 3% y/y. The increase in stocks should add mild downward pressure on prices, which would then benefit wheat-importing countries such as South Africa and its consumers.
Regarding soybeans, the 2022/23 global harvest was estimated at 386 million tons, up by 9% y/y.
“Such an improvement in stocks should help keep global soybeans prices in check over the foreseeable future and thus benefit the livestock industry. As with maize, South Africa was interlinked to the worldwide market and would likely also see softening soybean prices,” Sihlobo said.
He added that rice had become more prominent, with increased demand, especially as some started to substitute wheat products with rice in the wake of the Russia-Ukraine war, which interrupted the global wheat trade.
However, the 2022/23 global rice harvest could fall by 2% y/y, estimated at 505 million tons. The unfavourable weather forecasts in much of Asia, mainly in India, Vietnam, Bangladesh, and the Philippines, were the major reason for the lower harvest. With consumption reasonably high, Sihlobo said this meant that global stocks would take a knock. IGC currently forecast 2022/23 global rice stocks at 169 million tons, down by 5% y/y.
Source: IOL