Accurately predicting commodity and ingredient prices in January for the year ahead is nearly impossible, but it is helpful to look at the factors that are expected to influence those markets. The three most obvious market movers are COVID-19 (still), war and weather, with the latter always a key factor on a regional if not on a global scale.
COVID is not going away anytime soon. After being discovered in late 2019, it came to global prominence in 2020 and by late 2021 had claimed more than 4.6 million lives from more than 200 million confirmed cases. It impacted many aspects of food production, distribution and consumption during that time, with some impact still evident as cases remain highly problematic in China.
The pandemic’s impact on labor and logistics still is being sorted as those influential market elements seek a post-pandemic normal. Freight rates (mainly truck and ocean) have fallen sharply from COVID-induced record highs and are expected to continue to moderate in 2023. Labor is another matter, with nearly all industries (food processors and manufacturers included) noting some level of ongoing worker shortages adversely affecting output. Most prognosticators don’t see the labor situation changing much in 2023.
The US Chamber of Commerce refers to the labor situation as “the great reshuffle” rather than “the great resignation” as hiring rates have outpaced quit rates since November 2020. During at least part of that time, the leisure and hospitality industries (which include foodservice) have had the highest quit rate and the highest hire rate.
Many employers have turned to raising wages to stem workers from quitting and to attract new workers, which feeds into inflation. The Federal Reserve is seeking to control inflation with higher interest rates, which are raising fears of recession, another potential factor driving markets, especially on the demand side.
Meanwhile, the war in Ukraine is nearing the one-year mark since Russia’s Feb. 24, 2022, invasion. The impact on grain and oilseed markets in 2022 has been well documented, but what lies ahead is murky. The agreement to allow the safe export of grain from Ukraine’s Black Sea ports for humanitarian reasons runs through March.
Despite the war, wheat exports from the Black Sea region, mainly Russia, have dominated international tender activity due to low prices, limiting export opportunities for US wheat.
Weather is an ongoing influence that will drive grain, oilseed, and other agricultural markets. Hurricane Ian in 2022 reduced Florida’s orange crop to the smallest since 1937. Drought across much of the US hard red winter wheat growing region was a concern as the crop headed into dormancy. Argentina, the world’s largest soybean oil and soybean meal exporter, has battled drought as well with soybean production forecasts slashed.
Key in 2023 may be a fading of the La Niña weather pattern that was thought responsible for dry conditions in both North and South America. Those conditions are expected to moderate in 2023, which bodes well for US winter and fall crops.
It’s still too soon to know about the 2023 US planted crop area, except for winter wheat, which was estimated by the US Department of Agriculture at 36,950,000 million acres in its Jan. 12 Winter Wheat and Canola Seedings report. Planted area was up 3,679,000 acres, or 11%, from 2022 and the highest in eight years. By class, estimates were 25.3 million acres, up 10% from 2022, for hard red winter wheat planted area, 7.9 million acres, up 20%, for soft red winter area, and 3.73 million acres, up 3%, for white winter wheat area.
Intentions for spring-planted crops (corn, soybeans, durum, and other spring wheat, sorghum, peanuts, and others) won’t be known until the end of March. Early forecasts call for more corn and modestly fewer soybean acres than in 2022.
Significant to crop production headwinds globally are supplies and prices of fertilizer, which spiked in late 2021 and into 2022 due in part to COVID and logistics issues, with supplies further disrupted by the war in Ukraine since the Black Sea region is a major source of certain fertilizers. So far in 2023, fertilizer supplies appear to be improving and prices are mixed but mostly lower compared with a year earlier, but analysts warn prices likely will be volatile, a common theme across the agricultural and food industries. Food Business News.
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