Posted on March, 18, 2024 at 09:29 am
On March 14, the International Grains Council (IGC) released its monthly update of the 2023/24 global grain and oilseed production, with some upside adjustments for significant crops.
The 2023/24 global maize harvest is forecast at 1.2 billion tonnes, up by 6% year-on-year. This improvement is due to better crop expectations in the US, Argentina, Ukraine, China, the EU and Russia. Consequently, the stocks will increase by 5% year-on-year to 294 million tonnes.
The IGC forecasts that the 2023/24 global wheat harvest will reach 789 million tonnes, well above the long-term average levels (albeit down by 2% year-on-year). A poor harvest in parts of Russia, Canada, Ukraine, Australia, the United Kingdom and Kazakhstan underpins the decline in the overall harvest. Still, global wheat consumption is likely to remain strong, particularly in Asia. As such, the IGC forecasts a 5% decline in stocks to 267 million tonnes. But from a long-term perspective, these will still be healthy stocks.
There is a lot of rice globally, with the 2023/24 global harvest forecast at 511 million tonnes, well above the long-term average (but down by 0.6% year-on-year). The minor decline in the harvest is primarily in India, Thailand, China and Indonesia. Global rice consumption is likely to remain stable this marketing year, and thus, the IGC also left the ending stocks roughly unchanged from the 2022/23 marketing year at 43 million tonnes.
These stock levels are broadly favourable for rice price moderation in the months ahead, which had started softening since the beginning of the year. This followed an uncomfortable price surge at the end of 2023 when India limited the exports of the product.
The 2023/24 global soybean harvest is estimated at 391 million tonnes, up by 5% year-on-year. Robust harvests in Argentina, China, Canada, Russia, Ukraine and Paraguay drove this expected uptick. With global soybean consumption reasonably stable, the increase in production resulted in an improvement in the global soybean stocks, now forecast at 66 million tonnes, up by 12% year-on-year.
While the global focus in the coming months will shift to the 2024/25 production season when countries in the Northern Hemisphere start planting in May, it is worth noting that there are abundant grain and oilseed supplies in the world market, which support the continuous moderation in global agricultural prices and subsequently global food prices.
The global agricultural prices already reflect this environment of improved supplies. The Food and Agriculture Organization of the United Nations (FAO) recently released its Food Price Index for February 2024. This index measures the monthly change in international prices of agricultural commodities, not final food products.
The FAO Food Price Index averaged 117.3 points in February, down by 1% from its revised January level and by 11% from last year’s corresponding period. The broad decline in grain and oilseed prices underpinned this moderation, again underscoring the importance of improved supplies in the 2023/24 season.
With this said, the food price inflation dynamics in South Africa may not necessarily follow the global trend this year. South Africa faces challenges within white maize production areas (and other grains and oilseeds).
The challenge with white maize is that it is not as widely traded as yellow maize, which forms the bulk of the globally traded maize. Therefore, there could be a disconnect between the domestic white maize prices and the general global maize prices, which are likely to continue softening due to improved supplies.
A large spread exists between South Africa’s futures prices of yellow and white maize following reports of bad crop conditions. On 15 March, South Africa’s white maize spot price closed at R5,189 per tonne, while yellow maize was R4,222 per tonne. This signifies the challenge with white maize supplies.
The products that play favourably for South Africa are wheat and rice, of which South Africa remains a significant importer. Moreover, the exchange rate will also matter, as South Africa imports roughly half of its annual wheat and rice consumption. Still, the challenge presented by persistent dryness domestically, at least over the near-to-medium term, is white maize supplies and the potential price reaction to reduced supplies.
Considering the above developments, the major risks to consumer food inflation in South Africa in 2024 will primarily be white maize products, while other products within the food basket may moderate or show sideways movement in prices.
Notably, the global grain and oilseed production prospects are relatively favourable and point to continuous moderation in global agricultural prices. DM
Source: Daily Maverick