Written for and first appeared in Business Day.
Global agriculture faces numerous challenges. The most recent one that requires close monitoring is the high temperatures in countries in the northern hemisphere. Over the past weeks and months the US, parts of Europe and China have all reported heatwaves.
There are growing concerns that the heat could harm the summer grains, which are still in the early growing stages in these regions. The livestock industry is equally anxious that the extreme heat could increase animal deaths. In June more than 2,000 head of cattle died of heat stress in southwestern Kansas. Countries such as Italy and Spain are feeling the impact of drought and heatwaves on crops and livestock as farmers struggle to sustain business operations.
These challenging weather events come while the world is in a food crisis and needs to improve agricultural output. Last week the heads of the UN Food & Agriculture Organisation, IMF, World Bank, World Food Programme and World Trade Organisation released a joint statement expressing concerns about growing hunger, and called for increased government support to boost agricultural production globally.
It was noted in the statement that “the number of acute food insecure people — whose access to food in the short term has been restricted to the point that their lives and livelihoods are at risk — [has] increased to 345-million in 82 countries”.
For now the US department of agriculture is maintaining an optimistic view about global grain production, reporting in its monthly World Agricultural Supply & Demand Estimates update that output in the 2022/2023 season might not fall significantly. However, the estimates may not have fully accounted for the current heatwaves. It will be interesting to see if these projections change in future monthly updates.
The department forecasts 2022/2023 global maize production at 1.18-billion tonnes, just 3% lower year on year. This is mainly because of an expected annual decline in the US and China’s maize harvests. Similarly, 2022/2023 global wheat production is set to fall just 1% to 771-million tonnes.
The expected lower harvest in various parts of Europe and Argentina is the cause of the expected decline in the overall world wheat harvest. This decline in production will weigh on stocks and could keep prices at relatively elevated levels for longer.
Still, despite all these events, agricultural commodity prices have softened over the past weeks from the levels in the days and weeks after Russia’s invasion of Ukraine and the disruptions this caused to global agricultural commodity markets.
Global rice and soya bean production is well above last season. This will help keep prices of these commodities at softer levels than at the start of the year.
The extreme weather events in the northern hemisphere are a warning signal for farmers worldwide. A critical signal for the southern hemisphere is that it could also face weather events that are more extreme in the 2022/2023 summer season. This region will start its summer crop planting in October. The latest weather forecasts suggest it will remain in a La Niña phase, which for Southern Africa implies that it is likely to have another good rainy season.
Meanwhile, East Africa and South America could experience dryness. Given that South America is a major producer of grains and oilseeds, the likely dryness would have implications for crop prices. Depending on the intensity of the expected La Niña, the relatively optimistic estimates of the US department of agriculture could change.
It is two months away from the new summer crop planting season for SA farmers, who will have to be on high alert for extreme weather events and use any strategies they applied in the exceptionally wet 2021/2022 season, which allowed SA to bring in a large harvest despite the heavy downpours at the start of the season.
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