Global Agriculture Faces Challenges and Opportunities in 2024

The past week witnessed downward pressure on corn prices due to disruptions in exports to Mexico caused by the temporary closure of rail crossings in Eagle Pass and El Paso, Texas. This decision left numerous U.S. commodities in a state of uncertainty. However, on Friday, U.S. Customs and Border Protection opted to reopen both crossings, providing some relief to traders. Another factor influencing the corn market is the weather in South America, particularly in Brazil, where hot and dry conditions pose a potential threat to the second-crop corn, despite forecasts indicating some rain.

The latest outlook for the 2023/24 U.S. corn market anticipates higher exports and reduced ending stocks. Exports are raised by 25 million bushels to 2.1 billion, reflecting the current pace of sales and shipments. With no other changes in use, corn ending stocks decrease by 25 million bushels to 2.1 billion. The season-average corn price for producers remains steady at $4.85 per bushel.

Globally, coarse grain production for 2023/24 is forecasted to increase by 2.7 million tons to 1,502.0 million. The foreign coarse grain outlook projects larger production, increased trade, and higher ending stocks compared to the previous month. Foreign corn production sees increments in Russia, Ukraine, the EU, and Egypt, offset by reductions in Mexico and Canada. Corn exports rise for Ukraine, the United States, and Turkey, with higher imports for Mexico and Iraq.

With more corn acres and fewer soybean acres than initially expected, there are distinct production outcomes in the corn market, where the impact of volatility is expected to be more subdued due to larger supplies. The importance of China's actions is being emphasized, as its decisions regarding buying patterns and inventory building have widespread implications.

Shifting the focus to Argentina, newly elected President Javier Milei's decision to increase export taxes on soybean oil, meal, corn, and wheat has surprised observers. This move contradicts his pre-election promise to reduce these taxes. The decision is attributed to the country's precarious financial situation, with the need for a substantial loan payment to the International Monetary Fund. Export taxes on agricultural commodities significantly contribute to the government's revenue. Any reduction could have a substantial impact on global agriculture, particularly considering Argentina's crucial role as a major exporter of soybean products, corn, and wheat, along with its position as a low-cost producer in the soybean sector.

The South American crops, particularly in Brazil, are yet to fully develop, and their outcomes will significantly impact corn prices in the spring.

In China, there are preparations to plant more than double the amount of genetically modified (GM) corn in 2024 compared to 2023. The expected increase in GM corn planting is significant, with implications for global suppliers as China, the world's second-largest corn grower, seeks to enhance self-sufficiency in the face of ongoing global tensions.

Meanwhile, the EU faces increased demand for imported corn due to heatwaves and drought affecting domestic production. Ukraine and Brazil are projected to be major corn suppliers to the EU-27 in the 2024-25 marketing year. Tensions surrounding Ukraine's duty-free access to the EU market may impact exports.

For corn importers in Europe and North Africa, a consistent stream of Ukrainian exports is expected in 2024. Despite logistical challenges and Russian attacks on infrastructure, the opening of new export routes and a marine corridor through the Black Sea have facilitated over 5 million metric tons of farm produce shipments. The geopolitical tensions in the region, including Ukraine's conflict with neighboring EU states, could impact Ukrainian exports.

War risks associated with operating vessels out of Ukraine's ports have made FOB (Free On Board) basis trades less desirable for buyers, with CIF (Cost, Insurance, and Freight) trades becoming more lucrative. The potential impact of war risks on trade dynamics and premiums for corn exports from Romania and Bulgaria is highlighted.

A recent report from CoBank highlights eight key factors in agriculture to watch for in 2024, with a particular focus on the expansion of soybean acreage in the coming year. Two primary reasons drive this expectation: the smaller soybean harvest in the U.S. in 2023 and an uptick in biofuel demand. This aligns with the consensus opinion, as U.S. soybean stocks are relatively tighter than those for corn. The current soybean/corn futures ratio also signals a potential need for increased soybean acreage.

Data for Technical Analysis (5H) CFD US Corn Futures - Mar 24 (ZCH4)

Resistance : 473.82, 474.3, 475.07

Support : 472.28, 471.8, 471.03                                          

5H Outlook

Source: Investing.com                 

Buy/Long 1 If the support at the price range 471.28 - 472.28 is touched, but the support at 472.28 cannot be broken, the TP may be set around 474.22 and the SL around 470.78, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 473.82 - 474.82, TP may be set around 476.00 and SL around 471.78, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 473.82 - 474.82 is touched, but the resistance at 473.82 cannot be broken, the TP may be set around 472.2 and the SL around 475.32, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 471.28 - 472.28, TP may be set around 470.50 and SL around 474.32, or up to the risk appetite.       

Pivot Points Dec 26, 2023 06:47AM GMT