Wheat prices across the globe surged this year as grain stocks expanded worldwide, especially in China, even as supply was thin due to drought and inflation surged amid monetary expansion moves due to the pandemic’s impact on the economy, according to an international sectoral group.

Citing countries’ export and stock measures and climate conditions, Eren Gunhan Ulusoy, the head of the International Association of Operative Millers (IAOM) Eurasia, stressed that a decline in wheat production on a global scale due to drought-affected global prices.

Since there is no regulatory institution such as the Organization of the Petroleum Exporting Countries (OPEC), countries take quick steps and restrict exports, Ulusoy told Anadolu Agency as part of the Turkey Grain Conference held in the Mediterranean resort city Antalya last week.

He noted that the world left 284 million tons of wheat stock last year, and the world stock usage ratio is around 35% this year.

He added, however, that when China’s stocks were excluded, the world’s stock usage ratio dropped to 14%-15%.

The stock usage ratio is the ratio of total stocks’ capacity to meet annual consumption.

The ratio is around 8% in the world’s largest wheat producers, and this is the source of tension in the wheat market, he noted.

Russia’s taxation

“This year, the most surprising data was the US Department of Agriculture’s expectation of 85 million tons for Russia’s wheat production, but it revised this to 73 million tons gradually month by month from June to September,” he noted.

He reminded that with this expectation, the price of wheat fell from $280 to $250 per ton in June.

He said that Russia’s Institute for Agricultural Market Studies (IKAR) expects the country’s wheat production to reach 75 million tons this year.

Ulusoy said other major sources of wheat production also decreased this year, including Canada and Argentina, and while Australia had a good season, its production was also below expectations.

When exporters have lower wheat stocks, they raise prices, and this affects all global markets, he said.

Saying that countries always have wheat stocks, he said Turkey’s wheat stock was around 4.7 million tons this year.

He noted that Russia implements a 70% tax for the difference between a base price of wheat — $200 per ton — and the market benchmark price,

The country’s tax was equal to $31, but today it reached $77, and it is expected to reach $90 soon, he added.

Chinese statistics should be discussed

Ulusoy recalled that China accounts for 20% of the world’s total population but holds more than 50% of the total wheat stock, at 148 million tons.

He said China’s statistics should be discussed, adding that while it has 148 million tons of wheat stocks, it will buy another 11 million tons this year. He said China will also buy 55 million tons of oilseeds this year, while its oilseed imports totaled 12 million tons three years ago.

“Something is wrong in China, or they are buying as a management principle,” he noted.

Trade record

This year, the world’s wheat production is expected to reach around 780 million tons, but even though wheat prices have increased, demand will not drop as there is a strong price elasticity in wheat, he said.

Ulusoy recalled that while wheat prices reached $500 per ton in 2007 and 2008, such high prices have not been seen since 2013.

This year, both drought and monetary expansion coincided and this situation increased prices rapidly, he noted.

Ulusoy said that this year, the global wheat trade will surpass 200 million tons for the first time.

Green deal rules will affect European wheat producers, which are important, but Russia and Argentina will probably not implement rules, he highlighted.

He noted that the current wheat price is around $200-$300, the price has been around $200 for the last seven years, but the world should forget the level of $200. Prices can hit $400 or even $500.

“There is no expectation for supply problems on a global scale. Prices increased, but the reason is not consumption. Demand rose due to stock measures,” he added.

By Gökhan Ergöçün,


About İsmail Uğural

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