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The world has just 10 weeks' worth of wheat stockpiled after Vladimir Putin's invasion of Ukraine disrupted supplies from the "breadbasket of Europe".
The UN has been warned that global wheat inventories have fallen to their lowest level since 2008 as food supplies are rocked by a “one-in-a-generation occurrence”.
Official government estimates put world wheat inventories at 33pc of annual consumption, but stocks may have slumped to as low as 20pc, according to agricultural data firm Gro Intelligence. It estimates that there are only 10 weeks of global wheat supply left in stockpiles.
Russia and Ukraine account for around a quarter of the world’s wheat exports and the West fears Mr Putin is trying to weaponise food supplies. Russia is on track for a strong wheat harvest this year, cementing Mr Putin’s control over the staple grain as bad weather spoils production in Europe and the US.
Fundamental analysis of commodities – Wheat
USDA reduced its forecast for the global wheat crop for the 2022/2023 season. Will the WHEAT quotes continue to rise?
USDA cut the forecast for the global wheat harvest in the 2022/2023 agricultural season by 4.5 million tons compared to the 2021/2022 season. Now it should be at least 774.8 million tons. World reserves will decrease more significantly - by 12.7 million tons. This will be supported by strong global demand, estimated at 787.5 million tones. The maximum decrease in the harvest is predicted in Ukraine, by more than a third or by 11.5 million tons - up to 21.5 million tons. Wheat production in Australia may decrease by 6.3 million tons and amount to 30 million tons. An additional positive for the quotes may be the risks of new anti-Russian sanctions. According to the USDA forecast, in the 2022/2023 season, Russia will retain the 1st place in world wheat exports and supply 39 million tons to other countries. This is 18.2% more than in the 2021/2022 season. It is obvious that the reduction of this volume for any reason can increase grain prices on world markets. In general, it can be noted that for the necessary balance of supply and demand, the USDA expects an increase in world wheat exports in the 2022/2023 season by 3.7 million tons compared to the previous season, contrary to the projected decrease in the global crop.
russia and ukriane are in the top 10 countries that grow and export wheat
But some people in Russia and Central Europe might have shortages.
Under the Wheat Open Market Sale Scheme, the central government used to buy wheat from farmers and sell it to big traders on the open market. Because of this sale, the prices of wheat, flour, maida, and other grains remain stable throughout the year. This year that too has been banned. Not only this, but the central government has also asked big traders not to wait for this scheme. That is, the government has no intention to buy from farmers in the near future and sell it in the open market. Private players have been granted the freedom to buy and export on their own.
Why does this happen?
This is not the first time this has happened. This is known as black marketing. These are various techniques of creating scarcity by limiting the supply of something in the market, and when the price suddenly rises owing to less supply and more demand, profit is earned by supplying at a higher price. Last year, one of the three agricultural laws that farmers were protesting permitted private dealers to stockpile enormous amounts of grain. If it had been adopted, there would have been no need for foreign exports, and demand could have been created by storing it in the country itself.
The formula is simple and clear:
Produce in excess ⇾ Hand over the reins to private players ⇾ Create artificial and artificial shortages of the same commodity (by disrupting supply/export) ⇾ Crying about “shortage” until it becomes a crisis ⇾ exploit opportunity in crisis.
Big businessmen have been doing this in the past as well. Talking about the last few months, the biggest examples of this come out in the form of vaccines and coal. Now wheat is the new source… what next?
How will it affect the general public?
If the effect continues, flour prices will soar. In the month of April, the average price of flour across the country stood at Rs 32.38 per kg, which is a record. It is nearly 10% more expensive than the previous year. When the wheat stock is depleted and wheat and flour costs are out of reach for the average citizen, the same government’s sympathetic traders will import foreign wheat and profit handsomely.
originally posted by: Irishhaf
is it that bad... probably not, is it bad though yes.
You dont remove a major play in exporting Ag then a lot of people in third world heck holes are going to suffer.
Total U.S. white winter wheat production is forecast at 230 million bushels, up 38% from 2021, with 15.7 bushels of hard white wheat and 214 million bushels of soft white wheat. Total hard red winter wheat production for 2022 is estimated to reach 590 million bushels, down 21% from 2021, while soft red winter wheat is forecast to come in at 354 million bushels, down 2% from 2021, according to the NASS report.