Gro's 2022 Watchlist: 9 Major Themes for Agriculture in the Year Ahead

Rising food prices have focused increased attention on global agricultural production and supply chains in the past year. Today, supplies of many commodities remain at their tightest levels in years, which is likely to prolong food inflationary pressures well into the new year.?

As a result, 2022 will be another year of unprecedented supply and demand shocks, tight food supplies, and uncertain climate conditions. Given this critical juncture, Gro is predicting what to expect with the most urgent issues affecting global agriculture in the coming year.

Here are Gro’s forecasts for global agriculture’s Top 9 major themes for global agricultural markets in 2022.?

Global Food Inflation Will Be an Ongoing Concern

Food inflation has taken hold worldwide. Gro’s US Food Price Index, currently up 24% year over year, is at its highest level since the COVID-linked spike of mid-2020. For Brazil, Gro’s Food Price Index is at its highest level ever, and is up 63% since the first set of lockdowns in Brazil in May 2020. Food price increases in Brazil have been exacerbated by the depreciation of the Real, which is down 27% over the past two years. The risk of further food price inflation has prompted some countries such as Russia and Argentina, to restrict exports in order to maintain domestic supplies.

Wheat Supplies Will Remain Tight?

Global demand for commodities is expected to remain robust in 2022 and underpin prices as the world economy continues to recover. For major wheat exporting countries, combined stocks-to-use is at a 13-year low after devastating drought in Canada and the US northern Plains, and reduced yields in Russia.?

La Ni?a to Threaten South American Soy and Corn Crops

The La Ni?a global weather pattern is back for a second year, which could have big ramifications for 2022 crops around the world. In South America, drought is dragging down Gro model yield forecasts for Brazil’s big soybean crop, which could depress global soybean ending stocks to levels not seen since 2015/16.??

US Farmers Will Plant More Acres?

The outlook for global crop balances by the end of 2022 will depend to a large extent on the number of acres US producers dedicate to each crop this spring. A banner year for grain prices has US farmers aiming to plant even more acres than they did in a record 2021. But high fertilizer costs and uncertain weather risks loom, and competition among crops will be very strong. Join Gro for our March 3 webinar, What Will Farmers Plant in 2022?, to hear our predictions for US planting intentions, weeks ahead of the USDA’s Prospective Plantings report.?

Vegetable Oil Demand Growth to Outpace Production Gains?

Vegetable oils will continue to be key to food inflation in 2022, after futures price gains for both palm and soybean oil topped 30% last year. Despite forecasts for total vegetable oil production to increase this year, the USDA still estimates overall global stocks to contract for 2022. Demand is expected to continue to grow due to the ubiquitous need for vegetable oils in both food and fuel.?

Biofuel Growth Will Continue Apace

The “food vs. fuel debate” for vegetable oils will intensify in 2022 as both production and demand for biofuels increases. In the US, plans for renewable diesel production would more than double capacity this year to 2 billion gallons (6.8 million tonnes). If all of the planned US capacity build-out does come online, this would require more than 3 million tonnes of additional feedstock, mainly soybean oil, which would significantly impact and tighten the soy complex balance sheet in the US.

China Import Growth to Slow but Domestic Prices to Remain High

China fueled much of the increased demand for world food supplies in recent years. Now, with the country’s hog population fully recovered from the impact of African swine fever (ASF) in 2018, China has less need to import pork. Growth in feed grain imports also should slow as the hog population stabilizes, though domestic prices are likely to remain high, and susceptible to spikes, after years of drawing down corn and wheat reserves. Wheat prices especially have soared to new highs on record use of wheat in animal feed.

Relief Is in Store for Protein Prices?

Protein prices have been some of the biggest contributors to rising food prices, but Gro expects some relief in coming months. For beef, US ranchers front-loaded their autumn sales to feedlots, which will increase beef supplies, and reduce prices, once the cattle reach market weight. And currently lofty profit margins for chicken producers are likely to push up broiler supplies and pressure prices for almost the next two years, Gro forecasts.??

Steep Coffee and Sugar Prices Will Persist

Soft commodities have seen some of the biggest price increases this past year, and Gro expects inflationary pressures to continue. Brazil’s next coffee harvest is expected to come in sharply lower after harsh weather early this season killed many young trees and left mature trees struggling. Meanwhile, Brazil’s top sugar producing region is suffering from a second year of record-setting drought that has pushed sugar prices to multi-year highs. Brazil is the world’s largest producer of coffee and sugar.