Wheat Global Market Outlook

  • The global production has been rising at a CAGR of approx. 2.58 percent over a period of five years. Production in 2017 – 2018 is estimated to be 758.24 MMT, a modest increase by 1 percent, due to high supply in the EU and Russian offset by lower harvest in the US
  • 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 approx. 3 percent from last year
  • With respect to wheat starch industry, approx. 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

Contract Structure

  • 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

Price Benchmarking

  • 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

Prices are expected to witness fluctuations based on the export demand. Russian export prices are benchmark, since Russia is the biggest exporter of wheat

Large buyers, who choose fixed-price short-term contracts (3 months), should enter into the contract on January 2018

Global Supply–Demand Analysis

  • The global production has remained nearly stable from the previous year, but has been growing at a CAGR of 2.37 percent over the past six years.
  • However, the global production is likely to decrease by 3.7 percent in 2018 – 2019 F, owing to abnormal weather conditions and likely reduction in yield in key producing regions, like the EU, the US, and Russia

Wheat Production by Country (2017– 2018 E)

  • The world’s wheat production is growing at a CAGR of 2.37 percent for the last six years, and around 70 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 14.8 percent in about over six years. However, the US is cutting down on its wheat production, with more focus on corn and soybean

Global Wheat Trade Dynamics

  • Exports of Egypt, the world’s largest importer of wheat, experience a shortfall to reach 11.3 MMT in 2016– 2017, but they are expected to revive in 2017 – 2018 to reach 12 MM
  • Russia has increased its market share for exports by 10 percent over the last five years, growing at a CAGR of approx. 25 percent to displace the EU and US as the top exporter in the world
  • The EU exports have risen at a CAGR of 15.7 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 17 percent between 2013 and 2016 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 about 11 MMT, making it an import dependent
  • Russia and the EU incur export tariffs of 0 percent to Egypt, as the latter requires imports to meet demand