Global Wheat Market - Potential Procurement Options

Global wheat prices have been on a downside risk since 2012. High wheat ending stocks for the second consecutive year, grain quality issues in European Union, and falling prices in adjacent markets of Corn and Soybean are some of the factors that have led to the sharp fall in wheat prices by as high as 2.52 USD/bushels for the following crop year 2014-15.

Apart from contributing in the falling prices, these issues are also leading to the change in procurement dynamics of wheat across the globe. U.S., the largest wheat exporter, is cutting down its wheat production by an average of 4% every year with more focus on Corn and Soybean crops. On the top of it, the drought conditions during March-April 2014 further reduced the wheat harvest yields. Together, they will lead to the reduction in the U.S. wheat exports by 6.8 million metric tons (MMT) for 2014-15 crop year. The gap from the U.S. was supposed to be filled by the European Union, the second largest exporter, which was heading towards a large wheat harvest with yields proving exceptionally well in France, Germany, U.K. etc.

However, the recent unexpected heavy rainfall in July 2014, delayed the crop's harvesting. This happened in severe degradation in the wheat quality in Europe and the large quantities of harvest grown for milling or malting will now be fit to feed animals only. Hence, the EU's wheat exports are also estimated to reduce by 6.5 MMT. Based on the analysis of this Article, it's anticipated that Russia, Argentina and to some extent U.K., Poland and Germany within EU will bridge that gap in exports from conventional countries and are emerging as the new procurement destinations of wheat in coming future.