Five Things To Watch in Grain Markets in 2024

The global nature of grain markets means that anything from geopolitical uncertainty in grain producing areas to rising weather risks can impact the availability of grain products in a given year. This year, there are five key factors that have the potential to influence the dynamics within grain markets.

When the Russia-Ukraine war began in 2022, the Russian wheat market was oversupplied and wheat in Ukraine and Russia was priced to sell. The Black Sea Grain Initiative ensured that exporters could clear their inventories and stabilized prices throughout 2022 and 2023.

However, for the first time in two seasons, the weather in Russia is far from ideal and could decrease the amount of wheat that will be available to export. Large portions of critical winter wheat producing regions in eastern Ukraine and southern Russia have experienced only 10%-30% of normal precipitation.

World importers, particularly in the Middle East and North Africa, now rely heavily upon cheap and available Russian supplies. Crop loss in Russia strips the market of this bearish sentiment from summer onward. Russian rainfall and temperatures in May will be critical. Additionally, the European Commission projects that European soft wheat production will decline 5 million tons in 2024 due to lost planted area.

Brazil in 2023 was the world’s largest corn exporter. In years of normal weather, Argentina and Brazil combine for 40% of global trade, up from only 30% in 2010 and highlighting the countries’ increasing importance. 

Normally, the United States Department of Agriculture (USDA) and South American agencies (such as CONAB, Brazil’s USDA equivalent, and the major grain exchanges in Argentina) are aligned in their respective South American production estimates during the spring months. This is not the case this year: 

The USDA projects Brazilian corn production at 124 million tons, while CONAB in Brazil estimates production at 111 million tons. The USDA projects corn production in Argentina at 55 million tons, while the Buenos Aires Grain Exchange estimates production at 49.5 million tons. 

This combined 18.5 million ton spread is the difference between an adequately supplied global corn market and one that’s rather tight. USDA numbers imply major exporter corn stocks as percent of consumption – the primary driver of price – at a large 10.8%. South American agency numbers imply major exporter corn stocks at a very tight 7.7%.

Northern Hemisphere producing countries largely avoided major weather issues as La Niña transitioned to El Niño. El Niño’s presence during the Northern Hemisphere’s summer months is typically a positive to rainfall patterns and grain yields. Grain yields were very close to longer term mathematical trends in the U.S., Europe and Black Sea Region. This kept fear of supply issues mostly absent from the market. 

However, the return of La Niña is imminent. La Niña typically challenges rainfall patterns and yields across the southern United States, while allowing for excessive heat in wide portions of the U.S. agricultural belt. But more than using normal La Niña-based correlations, it’s the speed at which La Niña arrives that leaves forward supply outlooks less reliable. The coming transition, expected to take place by July, will be much speedier than normal.