Posted on May, 14, 2024 at 10:02 am
On May 10, the United States Department of Agriculture released its flagship monthly report — the World Agricultural Supply and Demand Estimates.
This report is keenly observed monthly by the agricultural market participants worldwide. It provides annual forecasts for supply and use of maize, wheat, rice, soybeans, sunflower seed, cotton and other grains and oilseeds. The report provides insight into these commodities in the US and the world.
The department provides their first estimates for each new marketing year in May. On Friday, we received the first estimates for the 2024-25 season. But the observers of these reports typically have to read the first month’s data with caution; these data are still preliminary because the season has recently started in the Northern Hemisphere, and the Southern Hemisphere is still at the tail end of the 2023-24 season.
The 2024-25 season that the US department is reporting about will only start in about October 2024 in the Southern Hemisphere. So, a lot could change in most countries between now and October.
Moreover, weather forecasters, such as the International Research Institute for Climate and Society and the Australian Bureau of Meteorology, predict a return of a La Niña weather event in the 2024-25 season. This weather phenomenon typically leads to heavy rains in some regions, such as Southern Africa, while South America could see drier weather conditions. Still, the effect of the weather primarily depends on the intensity of the weather event. We can deduce that there remains major uncertainty about the global grain and oilseed production outlook for the 2024-25 season.
Be that as it may, the US department projections paint a broadly positive picture of the harvest. For example, the 2024-25 global maize harvest is projected at 1.2 billion tonnes, well above the long-term average (although down 1% year-on-year). The annual decline is a result of an expected shift in area planting in parts of the US from maize to soybeans and somewhat lower harvests in Argentina and Ukraine.
Tthe 2024-25 global wheat harvest is estimated at 798 million tonnes, up 1% from the previous season. The bigger harvests are expected in Canada, Australia, the US, Kazakhstan and China.
The 2024-25 global rice production is projected at 527 million tonnes, up 2% from the previous season. This is on the back of the expected large crop in Asia. Also worth noting is that the US department forecasts the 2024-25 global soybean harvest at 422 million tonnes, up 6% year-on-year. This improvement is due to the expected large harvest in Brazil, Argentina and the US.
These preliminary estimates paint an optimistic outlook for the 2024-25 global grains and oilseeds. If they were to materialise, the stocks would continue to improve and thus keep global grains and oilseed prices at moderate levels, which is beneficial to the consumers. Still, these are early days, and a lot will depend on the weather outlook.
So far, the International Research Institute for Climate and Society signalled the return of La Niña, a welcome development for the Southern Africa region, but less so for other major producing regions such as South America. One will have to keep a close eye on these production data in the coming months and how the US department assesses the impact of weather.
The weather projections through the International Research Institute for Climate and Society are vital in assessing the coming season’s production prospects and commodity price expectations. If the La Niña is not strong, the world could still have a decent harvest of grains and oilseeds in the 2024-25 season.
Moreover, if these forecasts are communicated carefully, the farmers may not be deterred from planting the typical crop area worldwide. If anything, they will carefully plan season production in various countries to deliver a decent harvest.
Source: Mail and Guardian