Wheat buyers in Asia, Africa, and the Middle East, who account for two-thirds of global wheat imports, have been caught off guard by the sharp 30% surge in wheat prices since April. This unexpected rally has left these major importers with relatively little supply on hand, as they had been buying cargoes just one or two months in advance, rather than the usual four to six months, anticipating that abundant supplies would persist.
Analysts and traders say that these importers who had been relying on expectations of continued bumper supplies will now have to buy grain at higher prices, which will ultimately be passed on to consumers. This comes at a time when consumers globally are still adjusting to higher inflation rates following the COVID-19 pandemic and Russia’s invasion of Ukraine.
“Nobody saw this rally in wheat prices coming,” said Ole Houe, director of advisory services at Australian agricultural brokerage IKON Commodities. “Millers and even traders haven’t covered much from exporters. The supply pipeline is kind of empty if you look beyond June.”
The price surge has been driven by a combination of factors, including frost damage to crops in top exporter Russia, as well as dryness or excessive rains threatening yields in the European Union. These production concerns have raised worries about lower global wheat supplies in the second half of 2024, a crucial period for global production and marketing.
The International Grains Council has already cut its forecast for 2024/25 wheat production by 3 million metric tons to 795 million tons, further exacerbating the supply concerns.
“For a very long time, buyers have slowed down their purchases as they watched prices go lower. Now we have a rally in prices and there is growing concern,” said Commonwealth Bank analyst Dennis Voznesenski. “Russia, which is the source for the cheapest wheat in the world, is facing production shortfalls and Russian prices are rising.”
This unexpected turn of events has left major wheat importers in a vulnerable position, as they will now have to buy grain at higher prices, adding further pressure on consumers already grappling with the broader inflationary environment.