by PressHigh wheat prices will last about six months
Shrinking supply causes high wheat prices
The agricultural market is still feverish after a record surge in demand in 2020. At the time, demand for crops from China helped push prices to multi-year highs. Analysts warn that high wheat prices will continue from the next harvest. The experts say the reason for the rise in price is a reduction in supply amid rising demand.
The situation is exacerbated by reduced yield in Canada and the United States. Adverse weather conditions have affected the production of wheat varieties with high protein content. Farmers’ concerns over the quality of Australian and French grain also affected market fluctuations. According to traders, the high cost of agricultural products will remain till the new harvest.
According to results from S&P Global Platts, last year wheat prices rose by 30%, the biggest rise in price was observed for Russian grain. As for the cost of products from Australia, it increased by 90 dollars per ton. The price of Canadian grain rose by 27 dollars per ton, the reason for the increase was a prolonged drought.
The increase in the cost of wheat leads to higher prices for a number of important products, such as bread, pasta, and others, while high food inflation in the world market should be noted. Such trends contribute to the growing anxiety of the population, which is forced to accumulate large stocks of grain. Large importers are also actively buying wheat, and high-protein varieties are popular. Purchased volumes are sufficient for several months. However, experts expect an increase in the supply of spring wheat and durum in the near future, which should stabilize the market a bit.
A number of countries that are considered major exporters have restricted the sale of grain to their traders, which has caused a new balance of power in the world market. For example, Turkey and Egypt have significantly reduced imports from several Eastern European countries and increased purchases of products from the European Union.
According to the EU, Egypt bought 1.2 million tons of soft wheat from local traders over six months. This amount is 127% more than during the previous period.
Experts do not rule out that Egyptian and Turkish importers will turn to American farmers for help. However, so far the cost of grain from the U.S. is quite high and uncompetitive.
For now, wheat prices will continue to rise, but sharp jumps are not expected.