Harsh weather curbs global wheat output, fuels sudden price surge
By Reuters
Harsh weather is reducing wheat production in major exporting countries, cutting inventories that have already been projected to hit nine-year lows while fuelling a sudden surge in prices. Dryness afflicting suppliers from Russia, the world’s biggest, to Argentina is making food production vulnerable as recent Russian attacks on grain ships in the Black Sea rekindle concerns about the war limiting supplies.
While analysts said top southern-hemisphere exporters Argentina and Australia have lost several million metric tons of wheat to drought and frost, a lack of moisture is hitting plantings for 2025 crops in Russia, Ukraine and the United States.
Russia also lowered its 2024 wheat crop estimate, according to a report Thursday citing Deputy Prime Minister Dmitry Patrushev. “The wheat market is getting tighter and it is going to get worse,” said Ole Houe, head of advisory services at IKON Commodities in Sydney. Estimated world wheat inventories have fallen about 14 per cent from record highs five years ago, US data shows, as poor weather hurt output and Russia’s 2022 invasion of grain-exporter Ukraine temporarily spiked crop prices.
Russian ballistic missiles attacked the port infrastructure of Ukraine’s Odesa region on Wednesday, the third such attack in four days.
Crops in Russia suffered from late frosts and then drought since April, Agriculture Minister Oksana Lut said. “In some regions, there hasn’t been any rain since April,” Lut told a conference. “I don’t know if there have been years like this before, when everything that could happen with the climate actually happened.” In the physical market, Black Sea wheat in Southeast Asia is quoted around $280 a ton, including cost and freight, up from $265 about a month ago. Chicago wheat futures jumped last week to their highest in four months after touching a 2020 low in July.
Some farmers in exporting nations, such as Australia and Canada, are holding back sales in anticipation that prices will climb even higher. “It is the trend most places where wheat comes from, farmers are not selling and it is becoming a problem for traders who have committed sales to millers,” said one Singapore-based grains trader at an international company. US farmer Doug Keesling, 50, said he was praying for rain for his fields in Chase, Kansas, after planting about 1,200 acres (486 hectares) of wheat during a third year of drought.
“I can dig down three to four inches and there’s not a single drop of moisture in this soil,” he said, referring to a depth equivalent to 8 cm to 10 cm.
About 94 per cent of Kansas, the top US producer of bread wheat, was suffering from abnormal dryness or drought this week, up from 83 per cent a year ago, US Drought Monitor data showed. Production prospects in neighbouring Oklahoma are lower for 2025 after dryness slowed plantings, said Mike Schulte, executive director of the Oklahoma Wheat Commission.
Higher Prices
US Department of Agriculture projects world wheat ending stocks at a nine-year low of 257.22 million tons in 2024-25 even as it sees global production at a record 796.88 million. Analysts surveyed by Reuters expect USDA will trim its stocks forecast on Friday to 256.14 million tons.
Consultancy Strategie Grains on Thursday estimated the main EU wheat crop at a 12-year low for 2024-25 after rains hurt harvests. In Argentina, the Rosario grains exchange trimmed its estimate for the country’s 2024-25 harvest by about 5 per cent to 19.5 million tons. Australia probably produced about 32 million to 33 million tons, up from last year but off earlier estimates by about 2 million to 3 million tons, analysts said. “Crops are not looking good,” Commonwealth Bank analyst Dennis Voznesenski said while touring wheat farms in South Australia this week.
This article has been republished from The Business Standard