Global grain and oilseed markets featured an unusual level of uncertainty and chaos in recent years. While headwinds may wane, RaboResearch analysts say crosswinds could continue in 2024 and beyond.
“Markets have been pretty bearish for most of the course of ’23,” said Steve Nicholson, Grains and Oilseeds Global Strategist for RaboResearch. “But we have a lot of both bearish and bullish things happening all at the same time.”
In a recent podcast, Rabo Research Food and Agribusiness analysts Owen Wagner, Andrick Payen, and Bruno Fonseca joined Nicholson to examine the state of the grains and oilseeds and fertilizer markets, providing a somewhat promising outlook for 2024.
“The situation for the fertilizers market is more simple than a year ago or a year and a half ago,” said Fonesca. “When we go into our affordability index, which is an index when we compare a basket of commodities against a basket of fertilizers, we are in a positive territory right now.”
Wagner said significant global developments, such as the election of Javier Milei in Argentina, may lead to a more open market, particularly for wheat and corn exports.
“[Milei] has tremendous implications for the global market,” said Wagner. “Argentina’s been more or less out of the picture for the last couple years, in part because their policies are always bit of a mess. And the drought hasn’t helped, either.”
Changing focus to concerns in the U.S., Payen said regional challenges, particularly in Kansas where winter wheat faces struggles due to insufficient moisture, loom over 2024.
“We haven’t seen the moisture,” said Payen. But “there are challenges region by region, on different continents, in different countries or even within the same country.”
Concerns of market volatility due to extreme weather patterns remain, added Nicholson.
“Weather forecasts this summer were calling for a high probability of a pretty strong El Niño,” he said. “Soil moisture continues to be a challenge across many major production areas of the world.”
The analysts stressed the importance of navigating through technical market moves and understanding the underlying fundamentals. Moderating interest rates and crude oil prices, slowing ethanol growth, increasing biofuels refinement capacity, animal feed costs will all play a role in shaping markets in 2024.
On the brighter side, Fonseca, a farm inputs analyst based in Brazil, highlights the stability in nitrogen fertilizers, particularly urea.
“We are not seeing much volatility in the urea market,” he said. “It’s calmer. We are seeing prices a much lower than they were. They are below the average in most of the regions that we cover.”
Fonesca said farmers can expect a more predictable and favorable environment for farm inputs. The post-COVID recovery of crop protection production resulted in a favorable scenario for farmers with decreasing costs for essential inputs.
Despite potential challenges, the analysts expressed confidence in the favorable conditions for farmers in the coming years.
“The dynamic of input costs have come down and everyone’s happy about that,” added Nicholson. “But the underlying commodity prices came down faster. And so you’ve seen compression of margins across all the regions. We see that it’s not just a North American phenomenon or South American phenomenon. This is across Australia across Europe and every place.”
For more details, listen to the full episode: RaboResearch Podcast: Chaos or clutter? (rabobank.com). Access past episodes and subscribe to RaboResearch podcasts on Apple, Google or Spotify.
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