Weather Woes Slash Peanut Yields, Spike Oil Prices Globally

After experiencing a period of exponential growth in Peanut cultivation, São Paulo's 2023/2024 harvest is expected to yield lower than in previous years. This decline is attributed primarily to a lack of rainfall in December 2023, which has significantly impacted crops in the main producing regions of the state and affects the end products such as Peanut Oil availability across the global market.

The Institute of Agricultural Economics (IEA – Apta), affiliated with the Secretariat of Agriculture and Supply, projects a production of approximately about 713.5 thousand tons for this year. This is a decrease from the over around 736 thousand tons produced during the 2022/2023 harvest. Initial estimates suggest a decrease in volume caused by irregular rainfall and high temperatures. These conditions also affect grain quality, hindering our ability to meet external market standards, as per the market experts. The drought has caused significant damage and unemployment in the sector. The decline in quality has impacted exports, making it difficult for members to pay their bills.

This further affects the market trading atmosphere considering Peanut Oil as an end-product used in agriculture sectors.  With the lower availability of Peanuts across the global market ahead of disrupted weather conditions, there results in limited availability in end-user sectors thereby affecting the overall market trading atmosphere and product availability across the global market. Compounding the issue of limited supply is the growing international demand for Peanut Oil. As consumers worldwide seek healthier cooking alternatives, the popularity of Peanut Oil has surged. This increase in demand is particularly pronounced in major markets such as China and India, where the preference for Peanut Oil in culinary applications continues to grow. For consumers, the rising prices will likely translate into higher costs for a variety of products. Peanut Oil is a common ingredient in many processed foods and is also widely used in the food service industry. Households and restaurants alike may feel the pinch as they adjust to the increased costs.

Supporting this further, the increase in export taxes and freight costs has also influenced the market dynamics. Higher export costs reduce the profitability of shipments, impacting the overall availability and price of Peanut Oil in the global market. Logistical challenges, including high transportation costs and disruptions in the supply chain, have further exacerbated the situation, leading to increased costs and higher prices for Peanut Oil. 

Additionally, the domino effect from Other Oils also plays an important role in the higher price of Peanut Oil across the global market. The global market for edible oils is interconnected. If the price of other oils, like palm oil, soybean oil, and others, goes up, it can put pressure on Peanut Oil prices as well, as consumers look for substitutes, thereby contributing to its higher prices including Peanut Oil.