Wheat accounts for 30% of the world’s grain production. Most of the harvested wheat is consumed, and a small part is used for industry or feed consumption. Therefore, as the second largest food crop in the world, the supply and demand of wheat is of great significance to global food security.
However, since this year, the world’s main wheat producing areas have encountered extreme weather, and the wheat production situation is not optimistic. Taking the United States, the world’s second largest wheat exporter, as an example, this year’s wheat output hit the lowest level in 19 years, and the wheat supply fell to the lowest level since 2007. The hidden worries about wheat production in many countries have directly affected the global wheat import and export situation and promoted the sharp rise of global wheat prices.
Global wheat rose strongly
Under the influence of tight supply and demand and strong imports in the global wheat market, global wheat prices continued to rise. This is the main logic of the international wheat bull market in recent months. In addition, the dry growth conditions in Russia and Ukraine pose a threat to the recently sown winter wheat. CBOT wheat prices rose for the fifth consecutive month, rising 6.51% in October, the largest increase in four weeks since April. In November, CBOT wheat futures recently hovered at a nine-year high, reaching the highest price of $8.07/bushel since December 2012. In addition, the hard red winter wheat contract on the Kansas Futures Exchange (KCBT) in December hit US $8.09-1/2, the highest price since the last seven years (since May 2014). The December hard red spring wheat contract on the Minneapolis Grain Exchange (MGEX) hit its highest price in nearly 10 years (since June 2011).
Global wheat hoarding wave
The world’s wheat exports mainly include 9 countries such as Russia, the United States, the European Union, Canada, Australia, Ukraine, Argentina, Kazakhstan and Turkey, accounting for 93.5% of the world’s total exports. The 10 major wheat importing countries are Egypt, Indonesia, Turkey, Algeria, China, Brazil, the Philippines, Myanmar, Japan and the European Union, accounting for 41% of global imports. After the crop failure of major wheat exporting countries such as the United States, Canada and Russia, the European Union has become a major exporter of wheat. Countries around the world are buying an unprecedented amount of wheat from Europe, with a record hoarding speed. Driven by strong market demand, the price of wheat futures in Paris hit a 13 year high at the end of October, once standing at 284 euros per ton.
The latest data from the European Commission show that by the end of October, the wheat sales in the EU were about 9 million tons. Analysts at agritel, a consulting firm, expect that the EU’s wheat exports in October may exceed 11 million tons, not only 25% higher than a year ago, but also the highest data in the same period in the EU in 20 years. According to the prediction of the U.S. government, the EU’s wheat export volume in this quarter will reach 35.5 million tons, surpassing Russia, the world’s largest wheat exporter. Sovecon, an industry consultancy, estimates that Russia’s wheat export volume in 2021 / 22 is expected to be 34 million tons, down 300000 tons from the previous estimate.
The regional contradiction between global wheat supply and demand is prominent
From the perspective of supply and demand, the global wheat supply and demand is tightening this year. According to the report released by the U.S. Department of agriculture in October, the estimated global wheat production in 2021 / 22 is expected to be reduced to 77587 million tons, the consumption is 787.1 million tons, and the year-end inventory is expected to be 277.1 million tons, a decrease of 11 million tons compared with the previous year. The global wheat supply and demand pattern is gradually tight. Due to the high concentration of wheat production and export countries, while consumption and import countries are relatively scattered, this pattern of prominent regional contradiction between supply and demand is very vulnerable to epidemic situation, policy changes, rising freight prices and other factors.
Shen Hongyuan, director of the research and Forecast Department of Zhengzhou grain wholesale market, believes that according to the supply and demand characteristics of “relatively concentrated production and export, relatively scattered consumption and import” of global wheat and the distribution of various trading countries, especially some African countries, South American countries and Central Asian countries, although the absolute import volume is small, once the global supply fluctuates, It is bound to affect the social stability of relevant countries and regions.
At present, novel coronavirus pneumonia and the variant strain are difficult to eliminate under the background of global inflation environment. In the long run, the price of wheat will remain high in the long run, affected by the epidemic situation, speculation in international speculative capital and the global liquidity.
Source: China Grain network
Post time: Nov-11-2021