Recap for February 2024
Soybean prices drop on exports, Brazil, China
Wheat complex futures posted mixed closes Thursday with Minneapolis and front-end Chicago soft red winter contracts advanced in technical buying and short-covering moves. Kansas City hard red winter wheat futures declined Thursday as the US Department of Agriculture posted net export sales for the week ended Jan. 25 within pre-report expectations but down 29% from the previous week, down 9% from the four-week average and a three-week low. Soybean futures were also brought lower by export sales figures — at 64,500 tonnes in the week ended Jan. 25, it was the lowest weekly number for 2023-24 since the marketing year began Sept. 1 — and concerns about falling prices in competitor Brazil coupled with economic concerns for the world’s largest buyer, China. Corn futures tagged on to soybeans’ tumble with losses limited by strong export sales of 1.2 million in the latest reported week. T
he March corn future subtracted 1¢ to close at $4.47¼ per bu. Chicago March wheat added 6¼¢, closing at $6.01½ per bu, with gains diminishing through March 2025 and declining thereafter. Kansas City March wheat pulled lower by 1¼¢ to close at $6.20¾ per bu. Minneapolis March wheat climbed 3¾¢ to close at $6.96 per bu. March soybeans sank 19¢ to close at $12.03¼ per bu. March soybean meal shed $6.60 to close at $361.70 per ton. March soybean oil fell 0.42¢ to close at 45.60¢ a lb.
Stocks posted a robust rebound Thursday from declines precipitated by ideas about the pace and starting point of the Federal Reserve’s interest rate cuts. The Dow Jones Industrial Average added 369.54 points, or 0.97%, to close at 38,519.84. The Standard & Poor’s 500 added 60.54 points, or 1.25%, to close at 4,906.19. The Nasdaq Composite added 197.63 points, or 1.30%, to close at 15,361.64.
US crude oil prices were lower Thursday. The March West Texas Intermediate light, sweet crude future was down $2.03 to close at $73.82 per barrel.
The US dollar index continued lower a third day Thursday.
US gold futures advanced. The February contract added $4.60 to close at $2,053 per oz.
Grain markets
Mainly linked to adjustments for maize, but with barley and wheat harvests also seen larger compared to the November GMR, the outlook for world 2023/24 total grains (wheat and coarse grains) production is increased by around 11m t m/m (month-on-month). Although much of the additional supply will be absorbed by increased use for feed, the forecast for global carryover stocks (aggregate of respective local marketing years) is lifted by 5m t from previously, to 590m. The figure for trade (Jul/Jun) is also boosted by 5m t, including uprated estimates for maize and wheat.
The Council's first projections for 2024/25 wheat supply and demand point to a slightly larger harvest y/y (year-on-year), with potentially better yields seen more than compensating for a modest pullback in acreage. With offsetting changes for food and feed, consumption is projected to match the prior year's record level and exceed production, potentially leading to a further drawdown in stocks, to a six-season low. A modest retreat in trade is predicted, including smaller deliveries to China and the EU.
With a downgraded outlook for Brazil outweighing increases elsewhere, 2023/24 global soyabean production is forecast 3m t lower than in November, at 392m (+6% y/y). Nevertheless, given expectations for record supplies, consumption and stocks are seen expanding, the latter to a five-year peak; largely on an increased figure for Argentina, major exporters reserves are pegged about 5m t higher m/m. Trade is projected broadly steady m/m, at 168m t (-2%).
Owing to a scaling back of expectations for leading Asian producers, 2023/24 world rice output is forecast 10m t lower m/m, with the net drop in availabilities channelled to reduced figures for consumption and stocks; the 5m m/m cut in global inventories is linked to smaller numbers for China and the major exporters. Trade is seen near-unchanged m/m, at 50m t, with a downgraded projection for India contrasting with increases for other suppliers.
The IGC Grains and Oilseeds Index (GOI) declined by 6% compared to the last Market Report, predominantly on a pullback in soyabean export quotations.
At 2,307m t, the world total grains (wheat and coarse grains) outturn is set to be the largest on record, with the 2% y/y increase tied mainly to a solid rebound in maize production. Consumption is expected to climb by 2% y/y, to 2,314m t, with feed, food and industrial uptake seen at fresh peaks. Global inventories may contract to 590m (-1%), a seventh successive drawdown. Including smaller wheat, maize and barley shipments, cumulative world trade is forecast to retreat by 3% y/y, to 415m t.
Tied to prospects for a rebound in Argentina, global soyabean production in 2023/24 is seen at a peak of 392m t (+6%). Also linked to gains in Argentina, consumption is predicted at a record, while aggregate inventories are set to climb for a second successive year, including accumulation in key exporters. After the prior year’s exceptional expansion, world import demand could retreat by almost 4m t as China and Argentina buy less, with Brazilian exports likely to contract by 3% y/y.
On the basis of reduced yield expectations in Asia’s dominant growers, outweighing gains elsewhere, global rice output in 2023/24 is predicted to contract by 1% y/y. As a consequence, the Council anticipates a softening of demand, while stocks are set to tighten, including in key exporters. World trade is projected to contract by 2% in 2024, most on weaker buying interest from Asian importers, most notably Indonesia. India will remain by far the biggest exporter despite another sizeable fall in shipments.
Global lentils output is seen down by 7% y/y on declines in major exporters, with consumption set to contract given reduced availabilities. World import demand is forecast to drop by 8% in 2024 (Jan/Dec), including a comparable reduction in Indian arrivals (-7%). Total trade in all varieties of pulses is predicted at 19.5m t (-4%), tied to expectations for smaller shipments of dry peas, lentils and broad beans.
World Farming Agriculture Commodity news - Short update - January 2024- 2nd Report
Australia
2024 will once again be an interesting year for Australia’s agriculture and food industry. El Niño didn’t turn out as bad as feared, with significant rain received across the eastern half of the country in January. Agri commodity prices are well down from the highs seen over the past two years, but Rabobank’s Commodity Price Index forecast is more positive for 2024 and farm input costs, like fertilisers and plant protection chemicals, should be more pleasant for the farming sector.
Interest rate cuts are on the cards in Australia for late 2024, but global economic headwinds are likely to continue. The global economic outlook for 2024, while better than 2023, is still subdued. China’s economy is likely to remain slow, which isn’t the best setup for our exports to the region, as Chinese consumer demand will need more time to gear up into full swing. The Australian dollar is seen as strengthening modestly against the US dollar towards USc 70 towards late 2024, which would be close to the top end of the USc 63-USc 72 range seen last year. The good news for those with loans and mortgages is that interest rates are expected to plateau for most of the next six months, before rate cuts come in towards the last quarter of the year. The tight labour market will continue and require an ongoing focus to invest in labour efficiency technologies.
El Niño is still with us, but several models increase the chances of the event potentially ending in Australia’s autumn or winter. For now, we have to plan with a rain outlook that might be weaker than the strong seasons of 2021 and 2022. And if the 2023 season is any indicator for 2024, the outlook is also far from given. January rains were problematic for some, causing flooding and problems for sectors like fresh produce. Still, they improved the confidence in major sectors.
Major agricultural sectors move confidently into 2024. Recent rains in a declared El Niño period have established more confidence. Grain farmers are likely to plan more optimistically for the purchase of farm inputs and the upcoming planting period of winter crops like wheat, barley, and canola. Especially in the growing areas outside WA, which was the only region that hasn’t received much rain. Also, for beef and sheep producers the outlook for farm-grown feed in the first half of 2024 overall looks more promising, allowing them to hold on to more of their livestock and changing the feeding pattern and the marketing period e.g. by going for heavier lambs for slaughter.
Farm input prices globally, both for fertilisers and for plant protection products, are forecast below last season. As Australia imports most of those products and continues to work through local inventories, we remain confident that costs on farm will look better than last year. However, geopolitics and the escalation of conflicts can result in big energy price swings which would also impact the costs of those products. In addition, we see an upside risk for shipping costs to bring those inputs onshore in Australia. Our global crude oil price outlook also remains rather modest and well below USD 100/bbl, at least as long as the conflicts in the Middle East don’t spread wider.
Geopolitics and shipping to remain areas of concern. 2023 brought more wars, with the conflict in Israel likely leading to another year of shipping delays and high ocean freight costs as more and more shippers take the long route around Africa. The good news for now is that shipping costs are still not as high as in the record 2021 Covid-related shipping crisis. If the Red Sea piracy attacks escalate further, Australia may once again struggle to easily find containers for export later in the year. Australia’s trade relations in 2023 improved with the beneficial removal of Chinese import duties on Australian barley and the tariff on wine now subject to review. But this relationship will remain fragile, and with US elections in November and a potential change of presidential powers, the world will have to brace for more geopolitical fragmentation between China and the US. This will likely also be felt in Australia’s trade relationships with China. The war in Ukraine has been going on for almost two years and we don’t see a quick end to it. Global markets, especially for grains, have found ways to price it in without too much volatility in most of 2023 and this is likely to continue in 2024.
Sustainability, and especially emissions reductions, will remain a key theme for the year(s) ahead. Australia and the world will continue to work on reducing greenhouse gas emissions. Supply chains are working on solutions, trials, and testing consumers’ willingness to pay. On-farm, most of the transitions are still to come, and more and more farmers seek to understand the emissions footprint of their operations and which changes to put in place.
New Zeeland
1) Central bank actions will flow through to the cost of funds. The current restrictive monetary policy settings might start to ease up later this year – but don’t be getting hopeful for a throw-back to post-GFC rate levels. Immense challenges remain for central bankers in developed countries when making calls to cut – or not to cut. Our view is that the Reserve Bank of New Zealand, in step with the US Federal Reserve, will hold off official cash rate cuts until 2H 2024 – and only then, cuts are still likely to only be modest. Still, wholesale interest rates have eased back since Christmas and are flowing through to retail: some good news for those with loans and mortgages.
2) China will chart a challenging course for exporters. Our key export market is likely to continue to have a slow economy this year. Property price pressures, weak consumer confidence, dwindling demographics, and lethargic global consumer demand for Chinese exports will all play a role here. This doesn’t bode well for strong commodity prices for New Zealand food and fibre export products heavily reliant on China.
3) Escalating geopolitical tensions and conflict could provide challenges all the way to New Zealand. The catch-all phrase “geopolitics” will permeate cross sectors and countries in 2024. While the war in Ukraine continues to drag on – with no quick end in sight – recent escalations in the Middle East, as well as continued concerning China-Taiwan relations, along with fresh worries for North Korea all add to the number of regions to keep abreast of. Markets, arguably, are still to price for this risk.
The latest shipping disruptions in the Red Sea place upward risk of another global supply chain shock and for potential implications one does not have to look further than the 2021 snarled supply chains and energy crisis. Input costs for New Zealand food producers, along with freight costs for getting our products to global markets are to be watched. Of course, limited fiscal stimulus and weak global consumer demand could possibly see NZ exporters sail right through this storm in a teacup. For now, our global crude oil price outlook remains rather modest and well below USD100 per barrel – at least while the conflicts in the Middle East don’t spread wider.
At the same time, there are some tail winds and cross currents that could help with navigating the blue horizon this year.
The New Zealand dollar is anticipated to strengthen modestly against the US dollar heading to USc 64 towards late 2024. This sits in what could be close to the top end of the USc 58-65 range experienced last year.
The much talked about El Niño has delivered a mixed bag of weather so far. NIWA indicates that El Niño will be alive and kicking at least until Autumn 2024, but global institutions see chances for El Niño to fade. Variable weather has so far been generally supportive for food producers.
Sustainability and emissions reductions will remain a key theme for the year(s) ahead. Supply chains are working on greenhouse gas emissions solutions, emissions reduction trials – all the while testing consumers’ willingness to pay. On farm, most of the transitions are still to come as many farmers seek to either continue their knowledge journey or consider which changes to put in place.
One wildcard for 2024 remains. The year ahead will bring intense democratic activity. New Zealand’s new coalition government is settling in with priorities being decided. Yet elsewhere, this year will see almost half the global population queue at the polls. Superpower election results from the likes of the US, India, the European Union and Russia, will determine global stability for years to come. Pivotal trading countries like South Korea, Indonesia, and the UK are also among the list.
2024 promises to keep food producers on their toes. With many variables to pay attention to, setting sail for success this year will require a strategic mindset, agility and collaboration. Traits New Zealand farmers and growers have no shortage of.
