Miller Magazine Issue: 143 November 2021

97 MARKET ANALYSIS MILLER / november 2021 How will developments in global food markets in 2021/22 differ from the COVID-19-driven situation of 2020/21? As world economic activity gradually returns to pre-pandemic levels, the likely upward pressure on food demand, along with rising energy prices as well as increased fertilizer and transport costs could further increase the degree of vari- ability and uncertainty in the global food system. Against this background, assuring uninterrupted access to adequate food supplies, both nationally as well as internationally, remains crucial. Poor weather conditions hit wheat crops particular- ly hard this season in several key producing coun- tries. Not surprisingly, therefore, global wheat inven- tories could fall below opening levels in the 2021/22 marketing season. With most of the drawdowns con- centrated in major exporting countries, the wheat stocks-to-disappearance ratio could fall to the lowest level in over two decades. This is a worrying sign of supply tightness in world markets, raising the possibil- ity of even further gains in wheat prices this season. On the demand side, wheat food consumption con- tinues to rise at almost the same pace as population growth. More importantly, feed use of wheat has in- tensified markedly since the previous season, largely on the back of tight supplies and high prices of more typical feed grains. Concerning trade, apart from quantity consider- ation, also the quality of this year’s wheat crop will play an important role in determining how trade flows will unfold in the 2021/22 marketing season. In the EU, where exports are forecast to rebound this season, significant quality downgrades could deter potential buyers, as evidenced by the recent cancelation of a purchase by China. Conversely, Russia seems to be benefiting from better quality wheat this season, increasing its attractiveness for international buyers. In fact, with strong global de- mand for high-quality Russian wheat but possibly more restrictive trade measures of Russia in view of lower domestic supplies, pressure on markets can be expected to mount even further. The current supply tightness in global wheat mar- kets must also be assessed in light of important and fast-changing developments in energy markets and supply chain logistics. Easing COVID-19 restrictions are likely to sustain economic recovery, boosting prices of oil, gas, and, as a result, fertilizer. In addition, port congestions, such as those witnessed recently in China and the US, are also a concern, contributing to supply chain disruptions, which – along with elevated freight rates – might add more volatility to wheat pric- es and increase import costs, which would be a par- ticular burden for the poorest countries in the world. World wheat export prices posted further gains in September as concerns persisted about shrinking production prospects in some of the major exporters. Concerns continued to be centered on tightening outlooks for exportable supplies in North America and Russia, and while the EU crop was still expected to be larger than the previous season's poor result, below-average quality was seen potentially limiting the volume of EU milling wheat for export. Upward price pressure was moderated by mostly good pro- duction prospects in Australia. Despite high prices, there was limited evidence of waning buying interest from importers and sustained strong demand provid- ed underpinning to global markets. AMIS Uncertainties in wheat markets prevail