Dan Basse, economist and founder of AgResource Company, predicted 2024 will be volatile for the grain industry during the opening session of the National Grain and Feed Association’s (NGFA) Country Elevator Conference, which was held December 3-5 in Louisville, Kentucky.
He highlighted five areas that will create volatility in the coming year:
- A two-theater war is occurring for the first time since the 1940s. The war between Ukraine with Russia disrupted the grain industry and its exports in the Black Sea region, and Ukrainian farmers are entering an abyss as the war begins its third year this winter, said Basse. And now more uncertainty is expected with the conflict between Israel and Hamas in the Middle East.
- U.S./European/global inflationary pressures cool. Basse said world central banks have hiked lending rates by record percentage basis which has cooled world inflation. “Rising rates have caused what banks intended,” said Basse. “Demand destruction.” U.S. government debt has reached $34 trillion and shows no signs of slowing with the U.S. funding two wars. Basse said a slow leak of the U.S. dollar is expected, while U.S. and global debt continues to soar with inflationary pressures lingering.
- Greater incidence of extreme heat and drought stagnate per capita world grain yields. Global ocean temperatures are at record highs which creates weather pattern disruptions. “Simple La Niña or El Niño analogs are no longer enough,” said Basse. “Consecutive record Northern and Southern hemisphere crops are needed to produce a supply cushion for world grain stocks.”
- China and the U.S. clash on economic competitiveness which produces ag trade regionalization. “China is the U.S.’s and the world’s largest ag customer,” said Basse. “China will secure a growing percentage of grain/soy needs from Africa and the Black Sea region in the years ahead. But China cannot afford to lose the U.S. as its largest consumer and importer.” The speed of the trade transition depends on the coming hemispheric harvests. The 2024 South American harvest is extremely important to keep pressure on world food prices, said Basse.
- Renewable diesel demand ramps up as U.S. soyoil exports fall to record lows. Basse said we are looking at the most disruptive period for U.S. biofuel supplies ever seen ahead. He sees domestic U.S. soyoil demand outstripping production in 2025. ”U.S. soyoil stocks will tighten, which produces the need to ration U.S. soyoil/canola oil food use and engender vegoil imports for food,” he said. “As 630 million bushels of new soybean crush plants come online by 2026, the U.S. will need an extra 9 to 11 million bushels of soybeans in 2026 as the U.S. soybean crush rate reaches 3 billion bushels.”
Basse finished his presentation explaining that world stocks of major world grain exporters are historically low right now. “The cupboard needs replenishing – this is where the volatility is coming from,” he explained. “If there’s a weather problem somewhere, things can get spicy.”
Economist Dan Basse has been in the commodity business since 1979, providing research and insight around the globe. He has counseled in 81 nations - by farmers, elevators, processors, millers, food companies, trading companies, importers, exporters, meat packers and more. Basse was raised on a dairy/grain farm in Waukesha, Wisconsin, and graduated from the University of Wisconsin-Madison in 1979. Basse has worked with Professional Farmers of America, Brock Associates and the agricultural research division of GNP Commodities in Chicago. In 1987, Basse founded AgResource Company to serve the needs of the U.S. and world agriculture community. Basse is a member of Farm Foundation and the Commodity Market Council.