Wheat Global Market Outlook

  • The global production of wheat has been rising at a CAGR of ~2.6 percent over a period of five years. Production in 2016 – 2017 is estimated to be 748.24 MMT, a modest increase by 1.7 percent, due to high supplies in the US and Russian offset by lower harvest in the EU 
  •  The key factors driving the growth include emphasis on wheat production in Russia due to export potential and the end-use industries such as feed and food, especially in South East Asia, with consumption having risen by ~3 percent from last year 
  •  With respect to wheat starch industry, ~4.7-4.9 MMT is produced on an annual basis. The major producing regions are France, the US, Germany, the Netherlands, Australia, the United Kingdom, Belgium, Canada, Japan and China

wheat-global-market-size

  • Animal feed manufacturers generally procure moderate amount of wheat, which could be between 200 MT and 500 MT in six months 
  • Beer, wine, and bakery manufacturers normally procure a small amount of wheat, such as 1,000–1,500 MT on a yearly basis
  • For both these industries, a short-term contract (3–6 months) can be negotiated with the suppliers
  • The key regions for wheat supply are the EU and Russia
  • MATIF price is the global benchmark for the EU trade of wheat 
  • The export price is the global benchmark for Russian trade of wheat

Wheat prices are expected to witness an upward trend for the next few months, followed by a prolonged downward trend.  Thus, large buyers, who choose fixed-price short-term contracts (approx. three months), should either enter into the contract  by January 2018 or reduce the length of their contracts to <3 months to leverage on falling prices and achieve significant cost savings. Small and mid-sized buyers could opt for spot buying from August 2017 onward 

  • Prices are likely to start decreasing from January 2018 onward. Until then, spot buying is recommended

Global Supply–Demand Analysis

  • The global production has remained nearly stable from the previous year, but has been growing at a CAGR of 2.58 percent over the past five years 
  • The major drivers of demand and supply are the end-use industries, such as feed and food, especially in South East Asia, with consumption in the region, having risen by 6.2 percent annually for the past 10 years
  • The world’s wheat production is growing at a CAGR of 2.58 percent for the last five years, and around 68 percent of the total production is dominated by the top five wheat-producing nations 
  • Among Asian regions, China and India are the world’s second and third largest wheat producing countries owing to the large arable land and favorable climatic conditions 
  • Russia’s wheat production is growing appreciably at a CAGR of ~14 percent over five years. However, the US is cutting down on its wheat production, with more focus on corn and soybean
  • Over a five-year period, the global food and industrial demand has risen by ~6.1 percent, chiefly driven by the requirement for wheat flour processors, and currently, constitutes 80 percent of the global demand 
  • Demand from the processed flour sector for bakery products is high in case of South Asia, which exhibits an annual demand growth rate of 6.2 percent
  • The global demand from the feed and residual sectors has risen by ~7.8 percent over a five-year period and rose by ~1.8 percent this year to 581.9 MMT compared to 2015–2016 
  • South Asian demand for wheat has grown annually by 6.2 percent over the past 10 years 
  • The demand is driven by sectors, such as animal protein for feed and processed flour demand for noodles and bakery products 

Global Wheat Trade Dynamics

  • Egypt is the world’s largest importer of wheat, currently experiencing a shortfall by 8.5 MMT and requiring imports 
  • Russia has increased its market share for exports by 10 percent over the last five years, growing at a CAGR of 27.62 percent to displace the EU and US as the top exporter in the world
  • The EU exports have risen at a CAGR of 4.38 percent over the last five years, due to rich harvests in regions, like France. The EU displaced the US to become the largest exporter, after Russia, since 2014–2015 
  • Wheat exports from Russia have grown at a phenomenal CAGR of 27.62 percent and are expected to further increase in the future, making Russia the top exporter in 2016–2017, displacing the EU 
  • Egypt is the world’s largest importer. Russia and the EU compete with  China for exports to Egypt. The latter has a shortfall in domestic wheat supply by 8.5 MMT, making it import dependent 
  •  Russia and the EU incur export tariffs of 0 percent to Egypt, as the latter requires imports to meet demand