Drought and limited exports will reduce global stocks of major agricultural products in 2024

High food prices have forced world farmers to increase production of grain and oil crops in recent years, but in 2024 their supplies may decrease against the backdrop of adverse weather caused by the El Niño phenomenon and export restrictions on biofuels, Reuters reports.

After several years of growth, world wheat, soybean and corn prices eased in 2023 on the back of increased Black Sea shipping and anticipation of a global recession, but will remain dependent on supply and food inflation in 2024. The El Niño phenomenon will continue in the first half of 2024, threatening to disrupt the supply of rice, wheat, palm oil and other types of agricultural products.

Commerzbank experts predict a decrease in wheat supply in the 2nd half of 2023/24 due to a reduction in supplies from the main exporting countries. At the same time, production of soybeans, wheat and corn in South America will increase, although this may be hampered by unfavorable weather in Brazil.

El Nino-induced dry weather in 2024 could reduce palm oil production, which would support palm oil prices, which fell by more than 10% in 2023.

"As a result, we should expect a reduction in global stocks of grain and oil crops, an adverse effect of El Niño in the Northern Hemisphere during the growing season for the first time since 2015, a decrease in the dollar's exchange rate against world currencies and an increase in food prices," the message reads.

IKON Commodities said three months of intense heat in Australia ended a streak of record harvests as farmers planted wheat in dry soil that will reduce yields. At the same time, the USA will increase production of soybeans, wheat and corn in 2024, as will Argentina, which has had favorable rainfall for a long time. In Brazil, the forecast for the corn harvest has been lowered due to a prolonged drought, but soybean production may break the record.