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Global flour wheat production reduction

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Foreign media news on December 7: just in October this year, a well-known flour processor in the Middle East spent more than US $23 million to buy a ship of Australian high-quality wheat. Now they are willing to buy a similar ship of wheat at an additional price of 10%, but they can't finalize the contract because exporters can't find enough flour wheat.


Due to the hot and dry weather in North America and the rainy weather in the French wheat harvest season, Russia, the number one exporter, imposed export restrictions and raised tariffs, resulting in tight wheat supply in the world's major wheat exporting countries. Traders who export high-quality wheat are now trying to buy wheat from alternative producing areas, while buyers worried about food security are competing to enter the market and push wheat prices to multi-year highs.


A few months ago, the market once expected that the high yield of wheat in the southern hemisphere could alleviate the shortage of supply. In particular, Australia's wheat production this year is expected to be high for the second consecutive year, which makes the market place high hopes on it. However, since November, heavy rains have fallen in Australia, and the national rainfall has reached the highest record in the same period in 122 years, resulting in the slowdown of wheat harvest, the quality is also damaged by rainy weather, and the price of high protein wheat continues to rise. Although the Australian Bureau of agricultural resources and Economics (abares) predicted last week that the Australian wheat production this year reached a record 34.4 million tons, an increase of 3% over the previous year, rainfall affected the wheat protein content, resulting in the current high-quality Australian wheat APW compared with ordinary Australian wheat The premium of (ASW) has increased to about US $50 per ton, compared with less than US $10 per ton a few months ago. The FOB quotation of Australian standard white wheat with low protein content in Western Australia is US $318 per ton, while the APW quotation of Australian excellent white wheat with high protein content is US $365 per ton.


Recently, wheat prices on the Chicago Futures Exchange (CBOT) rose to a nine-year high, and wheat prices in Russia and Australia reached an all-time high. The monthly price report released by the food and Agriculture Organization of the United Nations showed that global food prices rose for the third consecutive month in October, reaching a ten-year high.


Due to the high price of wheat, many large flour mills were timid in purchasing wheat at the beginning of the year, hoping that the bumper harvest of Australian wheat would lower the price later, so the inventory of these processing plants is below the normal level at present.


Affected by bad weather, the supply of high-quality wheat in Russia, the United States and Canada was lower than normal. Andrei szzov, an analyst at sovecon, a consulting firm in Moscow, said that as in previous years, the average content of wheat protein sold in Russia this year was 12% to 12.5%. However, Russia's wheat production is expected to decrease this year. So far in 2021 / 22, wheat exports have decreased by 34% year-on-year.


Traders said that major importing countries, including Saudi Arabia and Iran, have been hoping to import large quantities of high protein wheat from Australia. But now importers may have no choice but to seek other sources. They may rush to buy wheat from the European Union and Russia first, and then the United States. EU wheat exports surged in the last week of November. According to the data of the European Commission, in the week ending November 28, EU wheat exports reached 1.36 million tons, raising the export volume so far this year to 11.6 million tons, higher than 10.45 million tons in the same period last year. Susan Jeanette, an analyst at Derain, a commodity analysis agency, said that the EU's wheat export demand increased significantly this year. In fact, the export data released by the EU is incomplete, and the wheat export data of France, a major exporter, is incomplete, so the actual export growth is higher.


In Canada, drought reduced spring wheat production to its lowest level in 14 years, and hot and dry weather also increased wheat protein content. However, high prices have led to the stagnation of sales of high protein wheat in North America, and exporters have hardly signed sales contracts for delivery in January or later.


USDA expects us wheat acreage to increase next season, but concerns about the supply of high-quality wheat may continue. Dan bass, general manager of Chicago agricultural resources company, said that according to the sowing situation and demand situation, U.S. hard wheat stocks may decline further next year.


Source: Master Boyi