In 2023, markets came back to fundamentals… what will 2024 look like?
In 2022, it was all about risks and fears and prices skyrocketed. In 2023, despite ongoing geopolitical risks, markets came back to fundamentals. Decent supplies (Black Sea supplies reach the world market despite the war) and sluggish demand (Inflation, high interest rates, economic slowdown) allowed prices to come back to balanced levels. A floor seems to have been found around current levels. Let’s review here the very short-term price influencers for early 2024 as risks and uncertainty remain elevated…
On the demand side, we will particularly watch China. In 2023, Chinese imports were a record. Prices will react to any new purchases, particularly in the US (Soya, corn, wheat) and the EU (Wheat). India could also play an important role for the wheat market. Will they open their doors to imports? A decision to cut import duties should be made in January at the latest and will depend on the current domestic crop conditions (and weather has not been ideal so far).
On the supply side, all eyes are staring at Brazil. There, planting and growing conditions have never been so adverse. Brazil, the world number one exporter in 2023, is facing a real risk of further production downgrades. For now, the USDA has been very conservative and we can only expect lower corn and soya figures in the next reports.
However, Argentina, if weather conditions continue to remain favourable, should mitigate any major incident in Brazil. Still in Argentina, the new President Milei decided to devalue the Peso. The exchange rate went from 366 to 800 Pesos per Dollar. Argentine farmers will receive more than double the amount of pesos for their grain compared to yesterday. World prices reacted on the downside as the objective is to incentivize farmer selling and exports.
Closer to us, Russia will be our wheat price barometer. During the 1st half of the campaign, Russia has been consistently (but not always) more competitive than European origins. Traditionally, Russian origins are less competitive during the 2nd half. Will this allow EU wheat to catch up with sluggish exports? This is the key element in 2024 and the answer could come from currencies (we need to have a weak Euro and a strong Ruble), from a State intervention (Russia could consider limiting exports by setting a high price floor) or a winter weather incident.
Another very important matter for EU & UK wheat prices are the massive imports from Ukraine. They are up 7MT since the EU decided to allow wheat imports from Ukraine without restrictions. Poland and Slovakia are blocking their borders. Can this situation continue for much longer? Will the EU finally understand this unfair competition? If the Odesa export corridor continues to perform well (4MT are scheduled for export via Odesa in December), then wheat imports into the EU could well ease in 2024 or the EU could consider limiting such imports once again.
2024 should also be the year of lower inflation and interest rates with the positive potential impact on demand and crude oil prices. We should also expect strong exchange rate volatility as the US will probably be faster to cut their interest rate policy.
All in all, it is hard to be very positive for prices in 2024. However, we know how fast things can change in our markets. During the next few weeks, the major price influencers could be Brazil (corn & soya) and India (wheat). As usual, we anticipate a very volatile Christmas period…
This is the last WEEKLY publication of 2023. We will continue to inform ODA clients via Whatsapp during the Christmas break. It has been a very complex season so far, but we will continue to work hard to allow UK farmers to make the best marketing decisions in 2024. If you wish to join our farmers community in 2024, please do contact me on sebastien.mallet@oda-agri.com. I wish you an early Merry Christmas and a Happy New Year!
Sebastien Mallet / ODA UK - CEO
sebastien.mallet@oda-agri.com
Main Office: +44 1223 894 791
Mobile: +33 6 82 83 71 87