From war to extreme weather, the world’s wheat crops are under threat, a view that’s being bolstered by a US report.
Production in Ukraine, one of the biggest growers, will fall by one-third compared to last year, according to a US Department of Agriculture forecast. Other major producers are battling drought, floods and heatwaves. In all, global stockpiles in the coming season will dwindle to a six-year low. Futures prices in the US surged by the most allowed by exchanges.
The smaller wheat harvests and a slow start to the US planting season is risking more food inflation ahead. Hunger is already on the rise in many parts of the globe.
In Chicago, benchmark wheat futures jumped by the maximum 70 cents a bushel after the report, which contains the USDA’s first global outlook for the coming season. Winter wheat and Minneapolis spring wheat each climbed by their daily limits to the highest since 2008 before trimming gains.
In addition to the war’s impact, adverse weather in North America having a significant impact. US farmers will abandon the most winter wheat in two decades because of drought gripping states like Texas and Oklahoma, the USDA said.
“With the winter-wheat crop coming much below what the traded expected, it is showing us that more emphasis will be given to corn and spring wheat planting,” said Arlan Suderman, chief commodities economist at StoneX.
Ukraine is out of play, and world markets are looking to other countries to fill the gaps. India has emerged as a major exporter in the past year, yet its stockpiles are forecast to drop to a five-year low. That accounted for much of the cut to world reserves. Brazil and Argentina are expected to export record amounts of grain.
Meanwhile, Russian agricultural trade is booming, despite the war. The country is expected to regain its rank as the world’s top wheat seller, overtaking the EU.
In other markets, corn and soybeans futures also rose. USDA’s yield estimates for the domestic corn crop fell below expectations amid slow plantings, which pushed futures for December delivery to a record.