Consumers expected to encounter food scarcity in 2024, driven by El Niño repercussions

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Over the past few years, the rise in food prices has prompted farmers worldwide to increase the cultivation of grains and oilseeds. However, consumers are expected to encounter supply shortages in 2024, driven by the repercussions of El Niño, export restrictions, and heightened commitments to biofuel production.

Analysts and traders suggest that global prices for wheat, corn, and soybeans are poised for a decline in 2023, following years of robust gains attributed to relief in accumulations across the Black Sea and concerns about a global recession. Despite this, prices remain susceptible to supply shocks and potential food inflation in the coming year.

The El Niño phenomenon, which has induced drought in significant parts of Asia this year, is anticipated to persist into the first half of 2024, posing a threat to the supplies of rice, wheat, palm oil, and other agricultural products in some of the world’s major agricultural exporters and importers.

Traders and officials foresee a reduction in rice production in Asia during the first half of 2024, given dry farming conditions and diminished water reservoirs that are likely to impact production.

Notably, global rice supplies have dwindled this year due to the El Niño’s impact on production. India, the world’s leading rice exporter by a significant margin, has imposed restrictions on its shipments.

While other grain markets are experiencing declining values, rice prices have surged to their highest levels in 15 years in 2023, with prices in some Asian export centers escalating by 40 percent to 45 percent.

Moisture shortages threaten India’s next wheat crop, potentially compelling the world’s largest wheat consumer to seek imports for the first time in six years.

By April of the next year, Australian farmers, the world’s second-largest wheat exporters, may be sowing crops in dry soil after extreme heat diminished this year’s production, ending a streak of three consecutive record harvests.

This situation is likely to drive buyers, including China and Indonesia, to seek larger quantities of wheat from other exporters in North America, Europe, and the Black Sea region.

On a positive note for grain supplies, corn, wheat, and soybean production in South America are expected to improve in 2024, though climate variability in Brazil introduces some uncertainties.

In Argentina, heavy rains in agricultural areas are anticipated to boost soybean, corn, and wheat production in one of the world’s major grain-exporting countries.

Brazil is on track to achieve near-record agricultural production in 2024, although recent weeks have seen a decline in estimates for the country’s soybean and corn production due to dry weather.

Global palm oil production is also likely to decrease next year due to the dry El Niño phenomenon, supporting cooking oil prices that experienced a decline of more than 10 percent in 2023. This production decrease coincides with expectations of increased demand for palm oil-based biofuel production and cooking oil.

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