Asia wheat crunch to persist as farmers seek better prices

Asian wheat buyers are struggling to secure supplies as farmers in top exporting nations hold back sales following production cuts that have pushed global prices to multi-year highs, millers and traders said.

Intense heat withered crops in recent months across the world’s most important export hubs of the Black Sea, Canada and Europe, catching trading firms by surprise and leaving buyers facing shortages and potential output cuts at flour mills.

Large wheat growers such as China have also stepped up imports of the grain this year, ensuring that competition for wheat across Asia will persist.

“Prices have gone up more that what we expected,” said the owner of a leading wheat miller and noodle maker in number two wheat importer Indonesia, who declined to be identified due to the sensitivity around food supplies.

“We expect a decline of around 10 per cent in wheat processing” in 2021 from 2020, he said.

Asian importers, who take up around a third of global wheat shipments, often react sooner to high wheat prices due to relatively low per capita incomes and long distances from major markets which add to delivery costs.

Buyers in Asia currently pay around $35 per tonne extra in shipping costs for wheat from major sellers such as Canada, more than twice the amount paid by those in North Africa for supplies from the Black Sea and Europe.

Other cost-sensitive consumers are already feeling the heat from high prices, such as top buyer Egypt last month which flagged the first hike in bread prices in decades, after the cost of subsidising its sprawling food programme ballooned.

The cost of staples like bread are a sensitive issue in many countries and high prices in the past have stoked social unrest similar to that seen in Egypt in 2011 when former President Hosni Mubarak was ousted..

Output drop

In response to widespread crop deterioration, the US Department of Agriculture slashed 20 million tonnes off the combined output of top exporters Russia and Canada in its most recent forecast for the current crop year, igniting fresh bouts of bullishness in global wheat markets.