Agri Picks Report September 29, 2023: Geojit

commodities

Geojit's report on Agri Picks

Crude palm oil (CPO) prices in 2024 are likely to average at least 11% more than this year as El Nino weather patterns are expected to reduce output in top producer Indonesia, the Indonesian Palm Oil Association (GAPKI) said on Thursday. In 2024, average CPO prices, including cost, freight, and insurance (CIF Rotterdam), could rise to $1,000 per metric ton from around $900 in the current year, said Fadhil Hasan, head of foreign affairs division at the association. Reduced supplies of palm oil and competing oils such as sunflower oil - which have been hit by Russia-Ukraine conflict - would support vegetable oil prices, including palm oil, he told reporters on sidelines of a conference. Used in everything from cakes to shampoo to cleaning products, palm oil competes with soyoil, sunflower oil and rapeseed-canola oil, produced mainly by Argentina, Brazil, Russia, Ukraine and Canada. In 2023, Indonesia's CPO production could rise by around 1 million tons from the last year's 46.7 million tons, Hasan said. However, production is expected to decline in 2024, with the extent determined by the intensity of the El Nino weather pattern, he said. "Impact of El Nino is already visible. Temperatures have increased and weather is very dry. We would see the real impact of this weather on palm production next year," he said. El Nino is a warming of Pacific waters that typically produces drier conditions over Asia, curbing the output of some crops such as oil palm, rice and wheat. Though El Nino is reducing rainfall in Indonesia, the effect is less pronounced in Malaysia, the world's second biggest producer, and according to a Malaysian official output there is expected to rise next year. The area under kharif crops across the country in the 2023-24 (Jul-Jun) season was at 110.3 mln ha as of Friday, compared with 110.0 mln ha a year ago, according to data from the Department of Agriculture and Farmers Welfare. The acreage of paddy, the key grain in the kharif season, was up 2.7% on year at 41.2 mln ha. Paddy sowing has picked up pace in the last few weeks, aided by rainfall across the country. Central and south peninsular India have received adequate rainfall since the beginning of September, after weak monsoon rains in August. The weather department has projected that rainfall in September will be normal at 91-109% of the long-period average, with normal to above-normal precipitation over east and northeast India and some areas of east-central and south peninsular regions. The area under coarse cereals was at 18.6 mln ha, slightly higher than 18.4 mln ha a year ago, the data showed. The area under oilseeds was down 2% at 19.3 mln ha, while pulses acreage fell 5% to 12.3 mln ha. Sowing of pulses has taken a hit this season because erratic rainfall in key growing regions made farmers shift to more remunerative crops such as soybean and small millets. Soybean acreage in the country was 1% higher on year as of today, according to the data. The area under cotton was down 3% at 12.3 mln ha. Meanwhile, acreage of sugarcane was 8% higher at nearly 6 mln ha as of today, the data showed. There have been concerns that sugarcane production in India may be hit next season, and there will be a shortage of sugar supply from the current season. However, the government has reiterated that the country has adequate stock of sugar to cover domestic demand for more than three months. The country had 8.3 mln tn of sugar stock as of Aug 31, the government said. In its preliminary estimate on Aug 2, the Indian Sugar Mills Association pegged the country's net sugar output in 2023-24 (Oct-Sep) at 31.7 mln tn, down 3.4% from 32.8 mln tn in the ongoing season. As for sunflower, sowing in the current kharif season was lagging by a whopping 65% on year as of today. Major sunflower growing states such as Maharashtra and Karnataka have received deficient rains so far this monsoon season, according to data from the India Meteorological Department. This has taken a major toll on sowing of the crop.

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29092023 - comm