Is the World Really Running Out of Wheat?
If someone told you the world has only a few weeks of wheat left before inventory runs out, would you believe them?
U.S. estimates show global wheat levels are stockpiled at 33% of annual consumption. The war in Ukraine, coupled with drought conditions in wheat growing regions, proves that government estimates are “not adding up,” according to Sara Menker, CEO of Gro Intelligence.
Menker’s team at Gro Intelligence finds, as of May 19, global inventories of wheat amount to 20% of annual consumption, meaning the world has just 10 weeks’ worth of global wheat consumption in storage.
“Conditions today are worse than those experienced in 2007 and 2008,” she says. “The lowest grain inventory levels the world has ever seen are now occurring, while access to fertilizers is highly constrained, and drought in wheat growing regions around the world is the most extreme it’s been in over 20 years.”
Trade Tensions Rise
This news comes as Ukraine continues to face setbacks in exporting its 20 million tons of stored grain. According to Jim Wiesemeyer, ProFarmer policy analyst, setbacks will continue as Russia destroyed a major Ukrainian grain export terminal in Mykolaiv (southern Ukraine) over the weekend.
“Before Russia’s invasion, around 98% of Ukraine’s grain exports would flow from ports on the Black Sea,” he says. “But those ports have been shut by a Russian naval blockade, and warehouses, rail yards and other key export infrastructure have been targeted and damaged by Russian attacks.”
Wiesemeyer says tensions continue to heat up as the U.S. warned 14 countries—mostly in Africa—that Russia is trying to profit from stolen Ukrainian wheat. He says three Russian cargo vessels have been suspected of stealing and transporting Ukrainian wheat to sell to starving, drought-stricken countries in Africa.
What’s in store for 2022?
On May 12, USDA released wheat projections for 2022. The estimates suggest 775 million metric tons (MMT) of wheat will be produced globally, which is only down 4 MMT from 2021.
USDA’s numbers show a 50% drop in Ukrainian wheat production, while Russia is on track to produce slightly more than 2021.
As Menker mentioned, heat stress is landing blows in wheat markets. India is experiencing this firsthand, which is why USDA expects it will product 11 MMT less in 2022 than 2021.
However, Aaron Smith, professor of ag economics at UC Davis, says China is the country the U.S. needs to keep an eye on.
“By the end of the 2022-23 crop year, USDA projects wheat carryover inventories to decline to 34% of consumption,” he writes. “However, more than half of those inventories are in China, which has been building its grain stockpiles for the past few years. These stockpiles are likely not accessible to world markets (assuming they are estimated accurately).”
Smith says inventories outside of China are below average, but not as low as in previous years.
More on wheat:
Russia Now Says It's Ready to Allow Food Exports From Ukraine, But With Conditions
