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Wheat Harvest Is Expected to Increase Globally, But Prices Continue to Rally on Inflationary Expectations

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Wheat Harvest Is Expected to Increase Globally, But Prices Continue to Rally on Inflationary Expectations

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IndexBox has just published a new report: ‘World – Wheat – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.

This year, harvests in the EU, the U.S., the UK, Argentina, Morocco and Ukraine are expected to increase, leading to a growth in wheat production. Even though global stockpiles of grains will remain high, there are boosted expectations for inflation due to forecasts of record demand and increased prices for other cereal grains. The rising global population and bioethanol production are key factors leading to this growth in demand for wheat. Another driving factor is the emerging trend in the EU to use more wheat in animal feed rather than barley.

Key Trends and Insights

In 2021, global wheat production is expected to rise by 13M to 932M tonnes (IndexBox estimates). Overall, crop production is expected to increase due to positive weather conditions in the EU, the U.S., the UK, Pakistan, Brazil, Egypt, China, India and Argentina. This record level of production will help keep global grain stockpiles high. In Russia, Kazakhstan, Australia and Canada, a small drop in crop production is expected. In Canada, this is a result of decreasing acres designated for wheat production and instead allocating the space for canola and barley.

In May 2021, global export prices for corn sharply increased, and wheat followed in suit. This was largely due to fears of poor weather conditions in the Northern Hemisphere. Another impact comes from the inflationary expectations that reflect the expected demand growth. In Canada, the price grew by $48 per tonne, in the US by $56 per tonne and in the EU by $43 per tonne. In Australia, the price also grew by $35 per tonne due to strong exports, while in Argentina, it grew by $27 per tonne. Russian prices grew by $34 per tonne but remained at a competitive level. World Bank expects the average wheat price (Wheat, US, HRW) to surge by 9% in 2021 to $230 per tonne and then to continue growing gradually.

Global demand for wheat in 2021 should reach a record level primarily due to increased demand in South Asia for food products containing wheat. Consumer food preferences in both India and China have shifted toward wheat products and thus driven up demand.

In the next few years, the use of wheat in animal feed is expected to expand, especially in the EU, where a high yield will enable this growth. A similar trend is expected in the U.S. and the UK, driven by growing wheat production. However, in East Asia, the use of wheat in animal feed is predicted to decrease against the rising use of corn.

In the next decade, bioethanol production should additionally cause the market for wheat to grow. Another key factor will be the increased demand for antiseptics arising from the COVID-19 pandemic. This surge in the antiseptic industry is expected to continue driving bioethanol production for at least the next few years.

Wheat Consumption by Country

The global wheat market stood at $295B in 2020, increasing by 3% against the previous year. This figure reflects the total revenues of producers and importers (excluding logistics costs, retail marketing costs, and retailers’ margins, which will be included in the final consumer price).

China (280M tonnes) constituted the country with the largest volume of wheat consumption, accounting for 31% of total volume. Moreover, wheat consumption in China exceeded the figures recorded by the second-largest consumer, India (105M tonnes), threefold. The third position in this ranking was occupied by Russia (66M tonnes), with a 7.2% share.

From 2012 to 2020, the average annual growth rate of volume in China stood at +1.6%. In the other countries, the average annual rates were as follows: India (+1.4% per year) and Russia (+14.6% per year).

In value terms, China ($123.6B) led the market alone. The second position in the ranking was occupied by India ($27.7B). It was followed by Russia.

The countries with the highest levels of wheat per capita consumption in 2020 were Russia (455 kg per person), France (331 kg per person) and the UK (266 kg per person).

Wheat Imports by Country

In 2020, supplies from abroad of wheat decreased by -8.1% to 167M tonnes, falling for the second consecutive year after three years of growth. In value terms, wheat imports contracted slightly to $39.9B in 2020.

In 2020, Egypt (9.6M tonnes), China (8.2M tonnes), Italy (8M tonnes), Indonesia (7.2M tonnes), Algeria (7M tonnes), Brazil (6.6M tonnes), the Philippines (5.7M tonnes), Japan (5.4M tonnes), Morocco (4.9M tonnes), Nigeria (4.7M tonnes), the Netherlands (4.4M tonnes) and Spain (4.1M tonnes) represented the main importer of wheat in the world, generating 45% of total import. Mexico (4M tonnes) occupied a minor share of total imports.

From 2012 to 2020, the biggest increases were in China, while purchases for the other global leaders experienced more modest paces of growth.

In value terms, the largest wheat importing markets worldwide were Egypt ($2.7B), China ($2.3B) and Italy ($2B), with a combined 18% share of global imports.

China saw the highest rates of growth with regard to the value of imports in terms of the main importing countries over the period under review, while purchases for the other global leaders experienced more modest paces of growth.

Source: IndexBox AI Platform

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The European Wheat Gluten Market Finds New Normality after The Bakery and Pasta Industry Eased from Pandemic Shocks

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IndexBox has just published a new report: ‘EU – Wheat Gluten – Market Analysis, Forecast, Size, Trends And Insights’. Here is a summary of the report’s key findings.

In 2019, the EU wheat gluten market increased by 4.9% to $932M for the first time since 2015, thus ending a three-year declining trend. Over the period under review, consumption saw a relatively flat trend pattern. The level of consumption peaked at $1,000M in 2015; however, from 2016 to 2019, consumption remained at a lower figure.

The countries with the highest volumes of wheat gluten consumption in 2019 were France (128K tonnes), Germany (112K tonnes) and the Netherlands (80K tonnes), together comprising 48% of total consumption. The UK, Spain, Italy, Poland, Romania, Belgium, Denmark, Greece and Sweden lagged somewhat behind, together comprising a further 41%.

From 2014 to 2019, the biggest increases were in Sweden, while wheat gluten consumption for the other leaders experienced more modest paces of growth.

In value terms, France ($191M), the Netherlands ($116M) and Germany ($101M) constituted the countries with the highest levels of market value in 2019, together comprising 44% of the total market. These countries were followed by the UK, Italy, Spain, Poland, Romania, Belgium, Denmark, Sweden and Greece, which together accounted for a further 42%.

The COVID-19 pandemic triggered a noticeable transformation of the markets in the EU, in particular, with regard to the wheat gluten market. So far, the uncertainty regarding the depth of both the European and the national economic decline is too great to make long-term forecasts. As wheat gluten constitute a common input in the production of bread and bakery, pasta, and some other food products, which are, in turn, consumer-targeted. Therefore, the pandemic brought changes to key market fundamentals: macroeconomic background, sales channels, supply chains, consumer behavior, and prices.

Against the backdrop of the introduction of quarantine restrictions which lead to the closure of production, a halt in transport activity, and a drop in incomes, over March-April of 2020 many countries experienced a booming consumer demand for long-term storage food products, including pasta. Against this backdrop, a noticeable increase in grain milling output was observed in March-April, also boosted by the disruption of pasta supply chains from Italy. This may affect local demand for wheat gluten, however, since pasta is largely made from durum wheat rich in natural gluten, no dramatic structural changes are expected in the market, although local fluctuations are possible. Further supply chain operations depend on the development of the virus situation, which is still highly uncertain, with the possible threat of the so-called ‘second wave’ of the pandemic.

Given the limitations of the HoReCa sector and the reduced number of visits to traditional malls and shops, the bread output fell dramatically across Europe, which certainly affects the demand for flours. This, however, was partially mitigated by the rising demand for flour for the production of pasta outside Italy, and the rising demand for ingredients for home baking.

As the wheat gluten market is predominantly a b2b-market, no dramatic changes are expected with regard to sales channels. However, online communication becomes increasingly important even in the b2b sales channels, with the use of distant negotiations and electronic document workflow.

The major risk in sales channels comes from the disruption of established international supply chains between wheat growers, importers, wheat processors, distributors, and bakeries/pasta producers due to asynchronous quarantine measures and restricted transport activity.

In March-April 2020, there was a noticeable increase in consumer prices for bread, flour, and pasta in many large consumer countries. This growth, however, was not accompanied by a corresponding increase in producer prices, which indicates the rush demand as the main reason for the price increase. Thus, producer prices rise slightly in Spain and France, in Italy they grew sharply from April to June, while in Germany, the prices also saw an increase from April to June, but it was less tangible than in Italy. From July to August, the producer prices in almost all of the countries stabilized, except for Italy which saw another hike in terms of grain milling producer prices.

Consequently, the crisis of the COVID pandemic does not yet lead to a significant increase in prices, and the market is trying to find a new balance. Further price dynamics will depend on the situation with wheat supplies and the degree of threat of a new wave of quarantine restrictions. However, since some transport and cross-border restrictions still remain, local small price fluctuations are possible due to the current supply and demand conditions.

In 2019, the amount of wheat gluten imported in the European Union declined dramatically to 330K tonnes, waning by -16.8% in 2018. Overall, imports recorded a slight decline. In value terms, wheat gluten imports fell rapidly to $504M (IndexBox estimates) in 2019.

The wheat gluten import price in the European Union stood at $1,526 per tonne in 2019, waning by -7% against the previous year. The growth pace was the most rapid in 2018 when the import price increased by 10% year-to-year. As a result, import price attained the peak level of $1,640 per tonne, and then reduced in the following year.

Average prices varied somewhat amongst the major importing countries. In 2019, major importing countries recorded the following prices: in France ($1,692 per tonne) and Denmark ($1,644 per tonne), while Spain ($1,343 per tonne) and Poland ($1,417 per tonne) were amongst the lowest.

The wheat gluten imports in the EU experienced a sharp contraction since the outbreak of the pandemic in March 2020, which went along with a sharp drop in average import prices. This generally corresponds to the growth in domestic production in the same period – due to the undermining of supply chains, more grain mill products began to be produced domestically. In the third quarter of 2020, however, both the prices and the volumes of import prices recovered to their previous level, which was due to the gradual stabilization of the market amid the opening of the economy.

Local fluctuations in supply and prices are possible due to risks in the supply chain and macroeconomic uncertainty. Weather conditions also act as an uncertainty factor for wheat supply in 2020

Given the pandemic-related limitation of the HoReCa and retail sector, the wheat gluten market is not expected to post any tangible gains in 2020. Afterward, the market is forecast to resume gradual growth, driven by gradual population growth and the recovery of the baking industry. Market performance is forecast to retain its current trend pattern, expanding with an anticipated CAGR of +0.7% for the period from 2019 to 2030, which is projected to bring the market volume to 725K tonnes by the end of 2030.

Source: IndexBox AI Platform

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Archives, Global Trade Daily, Imports/Exports

Global Wheat Production to Reach 758.3M tonnes in 2020

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IndexBox has just published a new report: ‘World – Wheat – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.

FAO’s updated projections indicate that global wheat production will reach 758.3 million tonnes in 2020, showing a slight decrease of 0.5 percent over the previous year’s highs and still at a fairly high level.

Despite general concerns about the COVID-19 situation, it is not expected to have any significant impact on wheat production this year. Potential yield declines due to unfavorable weather conditions in the EU, Ukraine and the United States will be offset by strong performances in Australia, Canada, Russia, and some Asian countries.

Total wheat production in Europe is projected to decline in 2020, constrained by a fall in harvests in the European Union (EU-27 excluding the UK), where total wheat production is expected to decline to 131 million tonnes. The decrease is due to a reduction in acreage, especially in France, the largest producer in the EU, due to excessive rainfall during the planting season.

In contrast, wheat production in the Russian Federation is projected to rise to 77 million tonnes, despite droughts in March and April, mainly due to an expansion in planted areas as wheat prices rise to record highs.

In Ukraine, wheat production is expected to decline to 25 million tonnes in 2020, which is 3.3 million tonnes less than in 2019, as a result of reduced planted areas and dry conditions in some regions.

In North America, unfavorable weather conditions in the U.S., including low temperatures and scarce rainfall, could affect wheat yields, leading to a decline in production to 50.8 million tonnes in 2020. In Canada, expanded winter plantings are expected to drive production to 34 million tons, assuming that yields and area sown with the spring crop remain unchanged.

In Asia, India’s wheat production in 2020 is projected to a record high of 105 million tonnes, largely due to increased planted areas driven by price increases. In Pakistan, favorable weather conditions will ensure production at 26 million tonnes, while in mainland China, the wheat output is expected to rise slightly.

In the Middle East, the overall outlook is also favorable. In Turkey, the largest producer in the region, wheat production is likely to rise to 20 million tonnes, up 5.3 percent from a year earlier. Results in neighboring countries are expected to remain unchanged from the previous year’s strong harvest.

In North Africa, dry weather in early 2020 will negatively impact harvest in Morocco, where production is projected at a four-year low, and to a lesser extent in Algeria and Tunisia, compared with highs in the previous year.

In the Southern Hemisphere, good crop prospects are expected in Australia, (21.4 million tonnes), Argentina (20.3 million tonnes), and Brazil.

Consumption By Country

The countries with the highest volumes of wheat consumption in 2019 were China (137M tonnes), India (102M tonnes), and Russia (43M tonnes), together accounting for 37% of global consumption. Turkey, the U.S., Pakistan, Egypt, Germany, France, Iran, Italy, and Algeria lagged somewhat behind, together accounting for a further 23%.

From 2009 to 2019, the biggest increases were in Algeria, while wheat consumption for the other global leaders experienced more modest paces of growth.

In value terms, China ($59.9B) led the market, alone. The second position in the ranking was occupied by India ($29B). It was followed by Turkey.

The countries with the highest levels of wheat per capita consumption in 2019 were Algeria (324 kg per person), Turkey (320 kg per person), and Russia (298 kg per person).

World Wheat Production

In 2019, global wheat production 762.2M tonnes, growing by 3.9% compared with the previous year. In general, production showed a relatively flat trend pattern. The growth pace was the most rapid in 2011 with an increase of 6.7% against the previous year. Over the period under review, global production reached the peak volume at 773M tonnes in 2017; however, from 2018 to 2019, production failed to regain the momentum. The generally positive trend in terms output was largely conditioned by a relatively flat trend pattern of the harvested area and a modest increase in yield figures.

Wheat Production By Country

The countries with the highest volumes of wheat production in 2019 were China (134M tonnes), India (102M tonnes), and Russia (75M tonnes), together accounting for 41% of global production. These countries were followed by the U.S., France, Canada, Ukraine, Pakistan, Australia, Turkey, Germany, and Argentina, which together accounted for a further 34%.

From 2009 to 2019, the most notable rate of growth in terms of wheat production, amongst the main producing countries, was attained by Argentina, while wheat production for the other global leaders experienced more modest paces of growth.

World Wheat Harvested Area

In 2019, the total area harvested in terms of wheat production worldwide reached 214M ha, stabilizing at 2018 figures. In general, the harvested area, however, continues to indicate a relatively flat trend pattern. The growth pace was the most rapid in 2011 when the harvested area increased by 2.2% year-to-year. Over the period under review, the harvested area dedicated to wheat production reached the maximum at 225M ha in 2009; however, from 2010 to 2019, the harvested area stood at a somewhat lower figure.

World Wheat Yield

The global average wheat yield reached 3.5 tonnes per ha in 2019, growing by 2.2% on the year before. The yield figure increased at an average annual rate of +1.4% over the period from 2009 to 2019. The most prominent rate of growth was recorded in 2013 when the yield increased by 5.5% against the previous year. The global yield peaked at 3.5 tonnes per ha in 2017; afterward, it flattened through to 2019.

World Wheat Exports

In 2019, global wheat exports expanded to 178M tonnes, with an increase of 3.9% on the previous year’s figure. The total export volume increased at an average annual rate of +2.9% from 2009 to 2019; the trend pattern remained consistent, with only minor fluctuations throughout the analyzed period. The pace of growth appeared the most rapid in 2014 with an increase of 7.7% against the previous year. Over the period under review, global exports hit record highs in 2019 and are expected to retain growth in the immediate term.

In value terms, wheat exports rose slightly to $39.9B (IndexBox estimates) in 2019. Over the period under review, total exports indicated a moderate expansion from 2009 to 2019: its value increased at an average annual rate of +2.9% over the last decade. The trend pattern, however, indicated some noticeable fluctuations being recorded throughout the analyzed period. Based on 2019 figures, exports increased by +12.2% against 2016 indices. The growth pace was the most rapid in 2011 with an increase of 44% y-o-y. Global exports peaked at $49B in 2013; however, from 2014 to 2019, exports remained at a lower figure.

Exports by Country

In 2019, Russia (32.5M tonnes), the U.S. (27M tonnes), Canada (21.5M tonnes), France (20M tonnes), and Ukraine (20M tonnes) were the main exporters of wheat in the world, generating 68% of total export.  Argentina took the next position in the ranking, followed by Australia.

From 2009 to 2019, the most notable rate of growth in terms of shipments, amongst the leading exporting countries, was attained by Ukraine, while exports for the other global leaders experienced more modest paces of growth.

In value terms, the largest wheat supplying countries worldwide were Russia ($6.4B), the U.S. ($6.3B), and Canada ($5.4B), with a combined 45% share of global exports.

Export Prices by Country

In 2019, the average wheat export price amounted to $224 per tonne, flattening at the previous year. Overall, the export price, however, recorded a relatively flat trend pattern. The pace of growth appeared the most rapid in 2011 an increase of 36% year-to-year. As a result, the export price reached a peak level of $315 per tonne. From 2012 to 2019, the growth in terms of the average export prices failed to regain momentum.

Average prices varied somewhat amongst the major exporting countries. In 2019, the countries with the highest prices were Australia ($259 per tonne) and Ukraine ($258 per tonne), while Kazakhstan ($187 per tonne) and Bulgaria ($195 per tonne) were amongst the lowest.

From 2009 to 2019, the most notable rate of growth in terms of prices was attained by Australia, while the other global leaders experienced more modest paces of growth.

Source: IndexBox AI Platform