World Grain - December 2008 - 41

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The international wheat market

A generally negative picture in spite of
record harvests
The international wheat market is characterized by falling stocks and an extreme increase in demand. The supply
situation is unsatisfactory: the reserves of the most important bread cereal will not recover signiﬁcantly in spite of record
harvests in 2008/2009.

Fundamental changes
The situation on the international grain
markets has changed fundamentally
since the start of the new millennium.
Whereas production far exceeded
demand during the 1990s, the supply
is now drastically reduced. The markets
need more grain than is being produced.
At ﬁrst sight the current situation would
appear contradictory. The last four wheat
harvests were good, and the forecast
for 2008/2009 is very promising too.
In was only in May of this year that the
United States Department of Agriculture
(USDA) raised its prediction for the
global wheat harvest to a new record
level of 656 million tons - eight percent
more than in 2007 - because of the
continuing good vegetation conditions
in many producing countries. In the
EU, the USA, Canada and Australia,
especially, the yield is expected to be
much bigger than in the year before.
Declining stocks
But this is unlikely to have a positive effect on stocks. Since wheat consumption
has nearly always been greater than the
yield over the past ten years, the originally enormous stocks have shrunk to
the lowest level for 30 years.
Even if this year's harvest conditions
are optimal the stocks will only have recovered slightly, from 114 million to 128
million tons, at the end of 2008/2009
the International Grains Council (IGC)
warns. A critical situation, because the
minimum quantity at the end of a business year should be enough to safeguard
the supply to the population until the
next harvest.

Wheat products: the demand is
greater than ever
The main reason for the boom is the
population explosion (the world's population is increasing by 81 million every
year) and the rapid rise in the demand
for wheat. Global consumption in
2008/2009 is estimated at 630 million
tons - well above last year's record ﬁgure
of 611 million tons. In many emerging
markets, especially, vigorous economic
growth is creating a much greater
demand for agricultural products as well
as industrial raw materials like oil and
metal. The rising income of the population is reﬂected in a change in eating
habits: the demand for wheat products
is greater than ever. The global supply
problem is aggravated by the fact that
wheat is not used solely for food production; about 20% of the harvest goes into
the production of animal feed or the
manufacture of bioethanol, for example.
However, other raw materials such as
maize and soy play a much more signiﬁcant role in these applications.
Increasing needs
According to Toepfer International, one
of the leading trading houses for agricultural raw materials, overall wheat consumption has increased by about 6 percent worldwide in the past eight years.
Many countries are stepping up their
imports: whereas Brazil, for example,
imported 5.6 million tons of wheat in
the business year 2003/2004, the current demand is 7 million t. The ﬁgures
for Morocco increased considerably in
this period too, and the country is now
importing four million tons of wheat
instead of 2.4 million. Countries with a

World total
Exporters
USA
canada
Argentina
Australia
Russia
Ukraine
Kazakhstan
EU-27
Importers
Brazil
Mexico
China
South Korea
Japan
Philippines
Indonesia
India
Iraq
Egypt
Morocco
Algeria
Nigeria
EU-27

2007 / 2008
106.9

2006 / 2007
110.7

33.3
14.0
9.5
8.0
12.5
1.5
8.5
9.0

24.7
19.6
10.5
8.7
10.8
3.4
8.0
13.9

7.0
3.6
0.2
3.0
5.5
2.5
5.3
2.0
3.0
7.0
4.0
4.4
3.0
6.5

7.8
3.6
0.4
3.4
5.7
2.7
5.6
6.7
3.0
7.3
1.8
4.9
3.3
5.1

Source: USDA

Tab. 1: Trade in wheat (mill. t)
traditionally large demand include Egypt
(7 mill. t), Algeria (4.4 mill. t), Nigeria
(3 mill. t), Indonesia (5.3 mill. t) and
Japan (5.5 mill. t). The world's biggest
exporters are the USA with 33.3 mill. t,
Canada with 14 mill. t and Australia with
8 mill. t. (Source: USDA wheat trade
statistics, 2007/2008).
Growing reluctance to export
Whereas the demand is increasing,
some of the big wheat suppliers are
showing a marked reluctance to export.
Embargos and reduced exports are characteristic of a new trend in the global
competition for basic foods. Russia, for
example, has imposed a temporary export tax on wheat until 1 July 2008. The
government of the Ukraine stopped its
deliveries to other countries completely
for several months last year; and even

World Grain - December 2008

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