Bearish Trend Forecast
The global grains market is forecasted to exhibit a bearish trend in the upcoming year, driven by the alleviation of supply pressures that accrued during the COVID-19 pandemic. Analysts suggest that the recent decline in the Food and Agriculture Organization’s Food Price Index (FPI) for the seventh consecutive month, particularly in cereals and vegetable oils, is a testament to this emerging paradigm shift.
Supply Trends and Market Analysis
The Food and Agriculture Organization (FAO) reported a decline in the FPI to 117.3 points in February 2024, marking a decrease of 0.9 points from January. This decrease primarily stemmed from the reduced price indices for cereals and vegetable oils, offsetting any upticks observed in sugar, meat, and dairy products. The FPI demonstrated a notable decline of 13.8 points (10.5%) compared to the corresponding period last year.
Research agency BMI, a unit of Fitch Solutions, remains bearish regarding the international grains market outlook for 2024. Despite recent price declines in commodities like corn and wheat, which surpassed forecasted average year-on-year declines, the agency highlights a prevailing pessimism among speculators. Notably, net short positions held by money managers in corn and wheat contracts are reported to be at their largest in at least the past five seasons.
Grains Production and Trade
The International Grains Council (IGC) attributes an increase in the estimate for total world grain production in 2023-24 primarily to maize. Despite an anticipated rise in maize production, reaching 1,234 million tonnes (mt) in 2023-24 compared to 1,163 mt in the previous year, global maize prices have witnessed a substantial decline of approximately 35% year-on-year. Speculators’ outlook remains gloomy, with significant short positions observed in maize, soybean, and wheat futures contracts.
Price Trends and Projections
The FAO notes a decline in prices across major cereals in February, attributing it to lower export quotations primarily driven by a robust export pace from the Russian Federation. Conversely, BMI anticipates limited optimism in global wheat and corn prices, projecting restrained price increases throughout the year owing to anticipated improvements in production and exportation.
While oilseed production, mainly soybean, is expected to increase by 5%, projections indicate downward pressure on prices due to higher production levels. BMI predicts increased rapeseed production in India, Russia, and Ukraine, coupled with lower crushing activity and heightened exports from Brazil, will likely constrain any significant rise in global soybean prices.
In conclusion, the global grains market will experience a bearish trajectory in the forthcoming year. It is primarily influenced by supply management and market sentiment. While some grains, such as maize and soybean, exhibit significant downward price pressure, exceptions, such as rice, warrant attention in this broader market trend.