After the increase in its prices in the world markets
Wheat consumers around the world are turning to cheaper alternatives
Rising wheat prices have increased food insecurity.
Reuters
Consumers in the Middle East and Africa are affected by the armed conflict in the production areas.
Reuters
An electronic board in a bank in the South Korean capital, Seoul, reflects the rise in the value of grain stocks.
EPA
People in Indonesia tend to buy rice grains to make up for the wheat shortage.
EPA
picture
Global wheat consumption is heading for its biggest annual decline in decades, as record prices of wheat are forcing consumers and businesses to reduce their use and switch to cheaper alternatives as food insecurity grows.
Consumers may face an increase in wheat prices in the second half of 2022, as importers, who have so far received shipments purchased several months ago at cheaper prices, are dealing with the new prices since wheat prices rose to their highest levels in May.
Analysts, traders and millers say global wheat consumption in the July-December period could fall by 5-8 percent from last year, much faster than the US Department of Agriculture's forecast of a 1 percent contraction.
“There will be a drop in demand for wheat for animal feed in Europe and China,” said Erin Collier, an economist with the Food and Agriculture Organization of the United Nations.
"High prices raise concerns about food security in parts of Asia and Africa, where countries cannot secure sufficient supplies from the international market," she added.
Millions face rising food costs and insecurity after the Russian war in Ukraine and bad weather in major exporting countries pushed grain prices to all-time highs.
Wheat futures have jumped 40% this year to a record high in March before falling back recently, although prices remain high.
The price of wheat shipments from the Black Sea region is about 400-410 dollars per ton, including the cost of shipping and delivery to the Middle East and Asia.
Prices have fallen from a peak of about $500 a tonne a few months ago, but are still well above last year's average prices of about $300 a ton.
"Wheat supplies are still very tight, we are not sure how much wheat will come out of the Black Sea, and other wheat-exporting countries are also experiencing bad weather," said Oli Ho of Aicon Commodities, an agricultural brokerage and advisory service in Sydney.
Collier told Reuters that the countries likely to face difficulties regarding wheat imports include Yemen, South Sudan, Sudan, Syria, Ethiopia, Afghanistan and Sri Lanka.
While rising costs put a heavy strain on household budgets, protests are erupting around the world and people are taking to the streets from China and Malaysia to Italy, South Africa and Argentina.
In Indonesia, the world's second-largest buyer of wheat, consumption has already fallen in the first five months of 2022 and a further decline is expected as costs rise.
Yan Issa Allamanda, a 37-year-old baker in Jakarta, pays about 10,000 rupees, equivalent to about 67 cents per kilogram of wheat flour, after she was paying about 8,200 rupees earlier this year.
"I had to increase the selling price ... but I am afraid that the increase in prices will lead to a decrease in consumer appetite," she said.
As consumers reduce their purchases of wheat products, bakers and pasta manufacturers are replacing wheat with rice.
"The prices of wheat flour are almost the same as the price of rice, and the replacement will happen automatically," said Franciscos Wolirang, head of the Indonesian Flour Mills Association.
He noted that the last time wheat flour prices rose dramatically, Indonesia's consumption fell by 4.5%.
While wheat prices jumped, the price of Vietnamese rice reached about $404 a ton, largely without an increase from late 2021. Data shows that Brazil, the largest market for US wheat, saw a drop in purchases of more than 3% in the January-June period, Although the government paid an additional 20% for the basic commodity.
"Consumers in northeastern Brazil may be replacing wheat products with regional products, such as tapioca," said Roberto Sandoli, chief risk manager at Hedgepoint Global Markets.
Alternatives to animal feed
High wheat prices are altering the ingredients that herders use in animal feed.
The French state agricultural agency expects the demand for feed wheat to fall by 13% from the 2021-2022 level to 3.9 million tons in 2022-2023.
"The decline in wheat consumption in the European Union is mainly because corn prices are very cheap, and there's also the economic issue of course," said Helen Duflo, an analyst at Greens Strategist.
In Vietnam, one of the world's fastest growing animal feed markets, rice is replacing wheat.
A purchasing manager at a mill in Ho Chi Minh City said the government had asked them for replacements amid disruptions in supply chains.
Bangkok-based traders said that earlier this year Thailand increased its quota of corn imports to 600,000 tons from 54,700 tons and lowered import duties to ease supply shortages in the feed market.
The impact of armed conflict in production areas
Buyers in Africa and the Middle East are more affected than other consumers by the Black Sea turmoil since Russia's war on Ukraine, and have had to turn to higher-priced suppliers such as Germany and France.
There are hopes of resuming Black Sea supplies after Russia, Ukraine, Turkey and the United Nations signed an agreement last week to resume exports of Ukrainian grain.
The first grain ship to leave Ukraine safely docked in Istanbul, Turkey, last Tuesday.
But the market remains skeptical about the value of returning Black Sea trade to its previous levels.
"We are not very optimistic about Ukrainian wheat supplies," says a trader in Singapore.
It is not in Russia’s interest to allow large quantities of grain exports from Ukraine while the war continues.”
Millions face rising food costs and insecurity after the Russian war in Ukraine and bad weather in major exporting countries pushed grain prices to all-time highs.
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