JSE ends the week firmer amid mixed international peers
Policies are wedded to a double fiction, that paid work will soon be available to those who seek it and the work will bring security and comfort
Police minister says specialised teams will be deployed to combat ‘zama zamas’
Nomusa Dube-Ncube, Amanda Bani and Mbali Frazer were interviewed for the position of premier on Saturday
Warren Buffett’s conglomerate hit by market turmoil
The reforms under way will attract much private investment, says minister in the presidency Mondli Gungubele
Transnet, Telkom and Eskom estimate that thieves and vandals cost them a total of R7bn a year due to metal theft
Cairo-mediated truce comes after three days of violence which left at least 43 people dead
Every time All Black coach Ian Foster fronts the media, he presents it with denial, not truth and honest appraisal
The vehicle is available in a single model boasting top features, enhanced mechanicals and a refined drive
Singapore/Jakarta — Global wheat consumption is headed for its biggest annual decline in decades as record inflation forces consumers and companies to use less and replace the grain with cheaper alternatives, amid growing food insecurity.
Consumers may face even higher wheat prices in the second half of 2022 as importers, who until now have supplied cargoes bought several months earlier at cheaper prices, pass on the costs from when wheat prices scaled decade highs in May.
Global wheat consumption in July-December could drop 5%-8% from a year ago, analysts, traders and millers say, much faster than the US department of agriculture’s forecast 1% contraction.
“There is going to be a drop in wheat demand for animal feed in Europe and China. Wheat demand for human consumption has also slowed in key importing countries around the world,” said Erin Collier, an economist at UN’s Food and Agriculture Organisation (FAO).
“High prices have raised food security worries in parts of Asia and Africa where countries are not able to secure enough supplies from the international market.”
Millions are facing mounting food costs and insecurity after Russia’s invasion of Ukraine and adverse weather in key exporting countries drove cereal prices to all-time highs.
Benchmark wheat futures jumped 40% this year to a record high in March before retreating recently, though physical prices remain high.
Wheat shipments from the Black Sea region are quoted at about $400-$410 a tonne, including cost and freight for delivery to the Middle East and Asia. Prices are down from a peak of about $500 a tonne reached a few months ago, but remain well above last year’s average of about $300.
“Wheat supplies are still super tight,” said Ole Houe at brokerage IKON Commodities in Sydney. “We are not sure how much wheat is going to come out of the Black Sea and there is adverse weather in other exporting countries.”
Countries likely to struggle with wheat imports include Yemen, South Sudan, Sudan, Syria, Ethiopia, Afghanistan and Sri Lanka, FAO’s Collier said.
As rising costs strain household budgets, protests have erupted worldwide with people taking to the streets from China and Malaysia to Italy, SA and Argentina.
In Indonesia, the world’s second-largest wheat buyer, consumption already fell in the first five months of 2022 and a bigger decline is expected as higher costs feed through the supply chain.
Yan Aisa Allamanda, a 37-year-old baker in Jakarta, is paying about 10,000 rupiah per kilogramme for wheat flour, up from about 8,200 rupiah earlier this year.
“I had to increase my selling price … but I fear that higher prices will discourage consumers,” she said.
As consumers cut purchases, bakers and noodle manufacturers are replacing wheat with rice.
“Wheat flour prices are almost at par with rice — automatically there will be shifting,” said Franciscus Welirang, chair of the Indonesian Flour Millers Association.
He noted the last time wheat flour prices rose significantly, Indonesia’s consumption dropped 4.5%.
While wheat prices have jumped, Vietnam’s 5% broken rice was quoted at about $404 per tonne, largely unchanged from late 2021.
Brazil, the biggest market for US wheat, saw purchases decline more than 3% in the January-June period, even though the country paid 20% more for the staple, data shows.
“In the northeast of Brazil, maybe consumers will replace wheat products with regional ones, like tapioca,” said Roberto Sandoli, senior risk manager at HedgePoint Global Markets.
Red-hot wheat prices are also changing ingredients livestock farmers use for animal feed.
The French farm office FranceAgriMer forecasts demand for wheat feed is likely to drop 13% to 3.9-million tonnes in 2022/23 from 2021/22.
“The drop in EU wheat consumption is mainly the consequence of very cheap [maize],” said Helen Duflot, analyst with Strategie Grains. “Then of course, there is the economic issue.”
In Vietnam, one of the world’s fastest-growing animal feed markets, rice is replacing wheat.
One purchasing manager at a mill in Ho Chi Minh City said they have been asked by the government to source alternatives amid supply chain disruption.
Thailand had earlier this year increased its maize import quota to 600,000 tonnes from 54,700 tonnes, and cut import duties to alleviate a tight feed market, Bangkok-based traders said.
In response to changing feed use, the USDA in July cut its global wheat consumption forecast for the 2022/23 marketing year to 784.22-million, down 1.77-million tonnes from its June estimate and 6.29-million tonnes below the prior year.
Buyers in Africa and the Middle East have been affected more than other consumers by Black Sea disruptions since Russia’s invasion of Ukraine, and have been forced to switch to higher-priced suppliers such as Germany and France.
There are hopes of a resumption in Black Sea supplies after Russia, Ukraine, Turkey and the UN signed a deal last week to unlock Ukrainian grain. The first grain ship to leave Ukraine safely anchored off Turkey on Tuesday.
But the market remains sceptical about Black Sea trade making a more meaningful return.
“We are not hugely optimistic on Ukrainian wheat supplies,” said one trader in Singapore. “It is not in Russia’s interest to allow large volumes of grain exports from Ukraine with the ongoing war.”
Would you like to comment on this article? Register (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.