Wheat Crop Problems Drive Global Prices Up

Combined wheat production in the European Union, Russia, and Ukraine is forecast down 12 percent from last year to the lowest level in 5 years, Reuters reports.

The EU wheat crop is down 9 percent from last year on hot, dry weather in the northern Member States, while production in Russia and Ukraine is down from recent bumper crops on a return to normal yields.

With global wheat production down substantially from last year, prices are rising. The recent climb in global wheat prices has led corn prices higher as well, even as the spread between the two has widened. Thus, wheat has become less preferred in feed rations relative to corn. This is particularly evident in the European Union, where corn imports and feeding are expected to be record high to support domestic feed demand.

Wheat and barley feeding are expected down from the previous year. Also offsetting the lower EU wheat feeding is higher soy consumption.

Globally, wheat food use is forecast to continue steady growth, but the share of global trade occupied by the European Union, Russia, and Ukraine is expected lower. These suppliers are likely to keep much of their core markets in place, but will likely lose share in regions such as North Africa, Sub-Saharan Africa, and Southeast Asia as their price advantage diminishes.

Argentina, Canada, and the United States are all expecting larger wheat crops and will likely become increasingly price competitive later in the year.