# Food inflation: Tight grain, oilseed supplies to keep prices elevated Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-12-13 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Global Farm Production Outlook 2023 Meta Description: Discover how drought, rain, and high energy costs will impact global farm production in 2023. Prices remain high, while supplies continue to dwindle. URL: https://financedigest.com/food-inflation-tight-grain-oilseed-supplies-to-keep-prices-elevatedhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-12-13t120848z1lynxmpeibc0ixrtroptp4year-end-food-1736814728303-compressed.jpg) By Naveen Thukral SINGAPORE (Reuters) – Drought or too much rain, the war in Ukraine and high energy costs look set to curb global farm production again next year, tightening supplies, even as high prices encourage farmers to boost planting. Production of staples such as rice and wheat is unlikely to replenish depleted inventories, at least in the first half of 2023, while crops producing edible oils are suffering from adverse weather in Latin America and Southeast Asia. The [world needs record](https://www.financedigest.com/red-box-recorders-launches-worlds-first-automated-audio-recording-compliance-verification-tool.html "RED BOX RECORDERS LAUNCHES WORLD’S FIRST  AUTOMATED AUDIO-RECORDING COMPLIANCE VERIFICATION TOOL") crops to satisfy demand. In 2023, we absolutely [need to do better than this year,”](https://www.financedigest.com/big-banks-want-survive-past-next-10-years-need-adapt.html "If the big banks want to survive past the next 10 years, they need to adapt") said Ole Houe, director of advisory services at agriculture brokerage IKON Commodities in Sydney. As this stage, it looks highly unlikely, if we look at the [global production](https://www.financedigest.com/global-industry-analysis-of-microalgae-based-products.html "Global Industry Analysis of Microalgae-based Products") prospects for cereals and oilseeds. Wheat, corn and palm oil futures have from dropped from [record or multi-year highs but prices](https://www.financedigest.com/tesla-posts-record-quarterly-deliveries-after-price-cuts-up-4-from-q4.html "Tesla posts record quarterly deliveries after price cuts, up 4% from Q4") in the retail market remain elevated and tight supplies are forecast to support prices in 2023. WHY IT MATTERS With food prices climbing to record peaks this year, [millions of people are suffering across the world](https://www.financedigest.com/uk-gives-bbc-world-service-20-million-pounds-to-support-english-language-broadcasting.html "UK gives BBC World Service 20 million pounds to support English language broadcasting"), especially poorer nations in Africa and Asia already facing hunger and malnutrition. Food imports costs are already on course to [hit a near $2 trillion record](https://www.financedigest.com/uk-shop-price-inflation-hits-record-8-in-january-brc.html "UK shop price inflation hits record 8% in January: BRC") in 2022, forcing poor countries to cut consumption. Benchmark Chicago wheat futures jumped to an all-time high of $13.64 a bushel in March after Russia’s invasion of key grain exporter Ukraine reduced supplies in a [market already hit](https://www.financedigest.com/tech-earnings-hit-pause-button-on-market-rally.html "Tech earnings hit pause button on market rally") by adverse weather and post-pandemic restrictions. Corn and soybeans climbed to their highest in a decade, while Malaysia’s benchmark crude palm [oil prices](https://www.financedigest.com/oil-ticks-up-as-u-s-inflation-cools-but-prices-set-for-monthly-drop.html "Oil ticks up as U.S. inflation cools, but prices set for monthly drop") climbed to a record high in March. Wheat prices have since dropped to pre-war levels and palm oil has lost around 40% of its value, amid fears of a global recession, [China’s COVID-19 restrictions and an extension of the Black Sea corridor deal](https://www.financedigest.com/analysis-no-china-no-deal-bid-to-break-sovereign-debt-logjams-gets-weary-thumbs-up.html "Analysis-No China, no deal: Bid to break sovereign debt logjams gets weary thumbs up") for Ukrainian grain exports. WHAT DOES IT MEAN FOR 2023? While flooding in Australia, the world’s second largest wheat exporter, in recent weeks has [caused extensive damage](https://www.financedigest.com/flood-most-damaging-peril-of-2016-causing-nearly-one-third-of-210bn-global-economic-losses-according-to-aon-catastrophe-report.html "Flood most damaging peril of 2016, causing nearly one-third of 0bn global economic losses – according to Aon catastrophe report") to the crop which was ready for harvest, a severe drought is expected shrink Argentina’s wheat crop by almost 40%. This will reduce global wheat availability in the first half of 2023. A lack of rainfall in the U.S. Plains, where the winter crop ratings are running at the lowest since 2012, could dent supplies for the [second half of the year](https://www.financedigest.com/ericssons-board-rebuked-by-shareholders-at-agm-for-second-year-in-a-row.html "Ericsson’s board rebuked by shareholders at AGM for second year in a row"). For rice, prices are [expected to remain high as long as export duties imposed earlier](https://www.financedigest.com/portuguese-airline-tap-swings-to-profit-earlier-than-expected.html "Portuguese airline TAP swings to profit earlier than expected") this year by India, the world’s biggest supplier, remain in place, traders said. Rice availability in most exporting countries is pretty thin except India, but it has export duties in place to reduce [sales,” said one Singapore-based trader at an international](https://www.financedigest.com/adnami-appoints-jeetesh-luhar-as-international-sales-director.html "Adnami appoints Jeetesh Luhar as International Sales Director") trading company. If we get a production shock in any of the top [exporting or importing](https://www.financedigest.com/china-nov-export-growth-slows-but-imports-accelerate.html "China Nov export growth slows but imports accelerate") counties, it can really swing the market upside. The outlook for corn and soybeans in South America looks bright for its harvest in early 2023, although recent dryness in parts of Brazil, the [world’s top](https://www.financedigest.com/top-10-fastest-bikes-in-the-world.html "Top 10 fastest bikes in the world") bean exporter, has raised worries. U.S. domestic [supplies of key](https://www.financedigest.com/the-key-to-supply-chain-data-security.html "The Key To Supply Chain Data Security") crops including corn, soybeans and wheat are expected to remain snug into 2023, according to the U.S. Department of Agriculture. The agency is forecasting U.S. corn supplies to [fall to a decade low](https://www.financedigest.com/dollar-falls-to-nine-month-low-as-powell-notes-progress-in-disinflation.html "Dollar falls to nine-month low as Powell notes progress in disinflation") before the 2023 harvest, while soybean stocks were seen at a seven-year low and wheat ending stocks are forecast at the lowest in 15 years. Palm oil, the world’s most consumed edible oil, is taking a hit from tropical storms across Southeast Asia where high [costs have resulted in lower](https://www.financedigest.com/bmw-bets-on-design-and-recycling-not-mining-to-lower-battery-costs.html "BMW bets on design and recycling, not mining, to lower battery costs") use of fertilizer. Still, [higher prices](https://www.financedigest.com/vhs-tapes-selling-for-46000-higher-than-original-price.html "VHS tapes selling for 46,000% higher than original price") of grains and cereals have encouraged farmers to plant more crops in some countries including India, China and Brazil. Planting is higher in several countries but the [output is expected](https://www.financedigest.com/uk-manufacturers-expect-output-to-fall-3-2-in-2023.html "UK manufacturers expect output to fall 3.2% in 2023") to remain subdued due to adverse weather and other factors,” said Ole. “Production is unlikely to be enough to replenish supplies which have been drawn down.” Explore the [Reuters round-up of news stories that dominated the year](https://www.financedigest.com/germany-home-prices-to-sink-nearly-6-this-year-reuters-poll.html "Germany home prices to sink nearly 6% this year – Reuters Poll"), and the outlook for 2023. (Reporting by Naveen Thukral; additional reporting by Mei Mei Chu in Kuala Lumpur and Karl Plume in Chicago; Editing by Lincoln Feast.) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---