Global wheat prices are on the rise as bad weather in Russia limits production of the worldwide staple grain.
Prices are likely to remain high in the near term, making wheat expensive across the world.
After declining for three consecutive months, global wheat prices rose in September due to unfavorable weather conditions in key producing countries, especially Russia.
Additionally, wet conditions in Canada caused harvest delays, while a similar situation in the European Union led to a sizable cut to production forecasts.
“However, competitively-priced supplies from the Black Sea region capped the increase in prices,” the Food and Agriculture Organization of the United Nations (FAO) said in a report.
Russia’s wheat export prices rise
The rise in wheat export prices from Russia is due to both environmental and market pressures.
Finimize said in a report:
Farmers are particularly anxious about winter wheat conditions, which could affect future yields.
As of late September, only 8.3 million hectares of winter grains had been sown in Russia, compared to 9.3 million hectares last year and the five-year average, according to estimates from SovEcon, a Black Sea research firm.
This represents the lowest level of winter grain planting since 2013, as unfavorable weather has delayed sowing in critical growing areas, SovEcon said.
Furthermore, the agency has also cut its forecast for wheat exports from Russia for the 2024-25 season, citing adverse weather conditions.
According to Finimize, wheat export prices have surged to $223 per ton, driven by weather woes and evolving market conditions. Russia is the world’s largest supplier of wheat.
War with Ukraine and bad weather limit the supply
Meanwhile, the Russian Minister of Agriculture said wheat harvest in 2024 could be somewhat smaller than what was anticipated earlier.
She cited bad weather in Siberia and the consequences of war in Ukraine as reasons for the same.
Carsten Fritsch, commodity analyst at Commerzbank AG, said in a report:
Since the beginning of August, Ukrainian troops have invaded the border region of Kursk, preventing the completion of harvesting there.
The affected region is the seventh largest for grain cultivation in Russia, she said.
Two other regions close to the Russia-Ukraine border that are important for grain cultivation are repeatedly being attacked by Ukraine.
So far, the Russian government expects a wheat harvest of around 132 million tons. The final figure will be released on October 10.
Fritsch said:
A significant downward revision is likely to cause wheat prices to rise further, as Russia is the world’s largest wheat exporter.
Markets may have to consider other options
The shrinking Russian wheat supply indicates volatile market dynamics, which is expected to affect consumers worldwide.
Countries that are dependent on Russian wheat may need to look at other viable markets to source wheat.
Ukraine, which is another top supplier of wheat in global markets could fill in the gap.
Government data showed that Ukraine’s grain exports for the season as of October 7 rose 56% on a year-on-year basis.
The rise was primarily due to an increase in wheat shipments.
Wheat exports from Ukraine rose by a whopping 80% year-on-year to 6.5 million tons as of October 7, according to official data.
However, Ukraine alone may not be equipped to fill the Russian gap if things worsen in Moscow.
Other options could possibly involve India, the second-largest producer in the world.
But, wheat exports have been banned by the Indian government since May 2022.
Additionally, India’s wheat stock with the central government is running low.
According to Food Corp of India’s data, wheat stocks with the nodal procurement agency as of September 1 were at 25.1 million tons, 3,3% below the buffer norm for July-September.
Wheat stocks were down 3.4% on the year and over 6% lower than August’s stocks, according to the data.
According to buffer norms, the minimum wheat stocks for July-September should be 27.58 million tons–operational stock of 24.58 million tons and strategic reserve of 3 million tons.
This makes it even more difficult for the Indian government to consider lifting the ban on wheat exports.
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