The Rise of Wheat Trade in 2024: A Comprehensive Analysis

Wheat is one of the most important and widely consumed crops in the world, providing food and income for billions of people. It is also one of the most traded commodities, with a global market value of over $100 billion in 2021. In 2023, wheat trade is expected to reach new heights, thanks to several factors that are boosting both supply and demand. In this article, we will explore the seven reasons why wheat trade is booming in 2023, and what implications it has for the global economy, food security, and the environment.

1. Climate change is affecting wheat production in different regions.

Climate change is having a significant impact on wheat production, as it alters the temperature, rainfall, and pest and disease patterns in different regions. Some areas are experiencing more droughts, floods, heat waves, and extreme weather events, while others are benefiting from longer growing seasons, higher precipitation, and improved soil fertility. This creates opportunities for trade, as wheat exporters can take advantage of favorable conditions and wheat importers can cope with shortages or price spikes.

According to the Food and Agriculture Organization (FAO), climate change could reduce global wheat production by 6% by 2050, but the effects will vary across regions. For example, wheat production in North America and Europe could increase by 8% and 7%, respectively, while wheat production in South Asia and Africa could decrease by 22% and 17%, respectively. This means that wheat trade will become more important to balance the global supply and demand of wheat.

2. Wheat consumption is rising in emerging markets, especially in Asia and Africa.

Wheat consumption is rising rapidly in emerging markets, especially in Asia and Africa, as incomes grow and diets diversify. More people are demanding wheat products such as bread, noodles, pasta, and biscuits, which are convenient, affordable, and versatile. Wheat consumption is also influenced by cultural factors, such as urbanization, globalization, and westernization.

According to the IGC, wheat consumption in Asia is projected to increase by 14 million tons in 2023, reaching 304 million tons. China and India are the largest consumers of wheat in Asia, accounting for 60% of the total demand. Wheat consumption in Africa is expected to rise by 10 million tons in 2023, reaching 79 million tonnes. Egypt and Nigeria are the largest consumers of wheat in Africa, accounting for 40% of the total demand.

3. Wheat quality is improving due to technological innovations and genetic engineering.

Wheat quality is improving due to technological innovations and genetic engineering, which are enhancing the yield, resistance, and nutritional value of wheat varieties. New varieties of wheat are being developed that have higher yields per hectare, better resistance to stress and disease, and enhanced nutritional value. For example, biofortified wheat can provide more zinc, iron, and protein to consumers, while drought-tolerant wheat can survive in arid environments.

Technological innovations and genetic engineering are also enabling farmers to optimize their inputs and outputs of wheat production. For example, precision agriculture can help farmers apply the right amount of water, fertilizer, and pesticide to their crops using sensors, drones, and satellites. Digital platforms can help farmers access information, markets, and finance more easily and securely.

4. Wheat trade is becoming more efficient and transparent due to digitalization and blockchain.

Wheat trade is becoming more efficient and transparent due to digitalization and blockchain technology, which are facilitating the exchange of information and verification of transactions among different actors in the wheat value chain. Digital platforms are enabling farmers, traders, processors, and consumers to connect and exchange information more easily and securely. Blockchain technology is providing traceability and verification of wheat transactions, reducing fraud and corruption.

Digitalization and blockchain technology are also creating new opportunities for wheat trade, such as e-commerce, smart contracts, and tokenization. E-commerce can help farmers and traders access new markets and customers online. Smart contracts can help automate and enforce the terms and conditions of wheat transactions, such as quality, quantity, price, and delivery. Tokenization can help create and trade digital assets that represent wheat commodities, such as futures, options, or tokens.

5. Wheat trade is benefiting from regional integration and trade agreements.

Wheat trade is benefiting from regional integration and trade agreements, which are lowering tariffs, harmonizing standards, and simplifying procedures for cross border trade. Regional blocs such as the European Union (EU), the African Continental Free Trade Area (AfCFTA), and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are facilitating wheat trade by creating larger markets, removing barriers, and promoting cooperation. Trade agreements such as the US-China Phase One deal and the UK-Australia free trade agreement are also opening up new markets for wheat exporters, by reducing tariffs, increasing quotas, and resolving disputes.

Regional integration and trade agreements are also creating challenges for wheat trade, such as competition, regulation, and compliance. Wheat exporters have to compete with other suppliers in the same market, and meet the quality, safety, and environmental standards of the importing countries. Wheat importers have to comply with the rules of origin, customs procedures, and sanitary and phytosanitary measures of the exporting countries.

6. Wheat trade is facing less competition from other grains such as corn and soybeans.

Wheat trade is facing less competition from other grains such as corn and soybeans, which are mainly used for animal feed and biofuels, while wheat is mainly used for human consumption. As the demand for meat and ethanol slows down or declines due to environmental and health concerns, wheat trade is gaining an edge over other grains.

According to the IGC, global corn production is expected to decrease by 2% in 2023, reaching 1.1 billion tons, while global corn consumption is expected to increase by 1%, reaching 1.2 billion tons. Global corn trade is expected to decrease by 4%, reaching 183 million tons. Global soybean production is expected to increase by 3% in 2023, reaching 385 million tons, while global soybean consumption is expected to increase by 4%, reaching 386 million tons. Global soybean trade is expected to increase by 2%, reaching 173 million tons.

7. Wheat trade is supported by strong global demand and stable prices.

Despite the challenges posed by the COVID-19 pandemic, wheat trade has remained resilient and robust in 2020 and 2021. The IGC forecasts that global wheat trade will reach a record high of 198 million tons in 2023, up from 188 million tons in 2021. The IGC also expects that global wheat prices will average $246 per tons in 2023, slightly higher than $245 per tons in 2021.

The strong global demand for wheat is driven by several factors, such as population growth, urbanization, income growth, dietary diversification, and food security. The stable global prices for wheat are influenced by several factors, such as supply and demand balance, weather conditions, currency fluctuations, and policy interventions.

Wheat trade is one of the most dynamic and important sectors in the global economy, food system, and environment. In 2023, wheat trade is expected to boom, thanks to several factors that are boosting both supply and demand. Wheat trade is also facing several challenges and opportunities, such as climate change, technological innovations, regional integration, and trade agreements. Wheat trade has significant implications for the global economy, food security, and the environment, as it affects the income, livelihoods, nutrition, and well-being of billions of people.

Wheat Trade: A Global Overview

Wheat is one of the most important cereal crops in the world, with a global production of over 778 million metric tons in 2021/22. Wheat is also a major commodity in international trade, with a total value of $61.8 billion in 2021. In this blog post, we will look at some of the key trends and statistics of the wheat trade, and how it affects the global demand and supply of this staple food.

Wheat Trade: The Top Exporters and Importers

According to the latest data from the Observatory of Economic Complexity (OEC), the top five exporters of wheat in 2021 were Russia ($8.92 billion), United States ($7.83 billion), Australia ($7.36 billion), Canada ($6.91 billion), and Ukraine ($5.87 billion). These five countries accounted for 60% of the global wheat exports in value terms. Russia was the largest exporter of wheat, with a market share of 14.4%, followed by the United States with 12.7%. Australia had the highest growth rate among the top exporters, with an increase of 176% from 2020 to 2021, mainly due to a recovery from drought conditions.

The top five importers of wheat in 2021 were Egypt ($4.53 billion), Nigeria ($3.32 billion), Indonesia ($2.98 billion), China ($2.94 billion), and Turkey ($2.49 billion). These five countries accounted for 23% of the global wheat imports in value terms. Egypt was the largest importer of wheat, with a market share of 7.3%, followed by Nigeria with 5.4%. Nigeria had the highest growth rate among the top importers, with an increase of 54% from 2020 to 2021, mainly due to population growth and food security concerns.

Wheat Trade: The Demand and Supply Dynamics

The global demand and supply of wheat are influenced by various factors, such as weather conditions, crop yields, consumption patterns, trade policies, and price fluctuations. According to the International Grains Council (IGC), the global wheat consumption in 2021/22 is projected to reach a record high of 780 million metric tons, an increase of 1% from the previous year. The main drivers of wheat consumption are food use, especially in developing countries, and feed use, especially in China. The global wheat production in 2021/22 is also projected to reach a record high of 790 million metric tons, an increase of 2% from the previous year. The main contributors to wheat production are Russia, Canada, Australia, and India, which are expected to have bumper harvests due to favorable weather conditions.

The global wheat trade in 2021/22 is projected to decline slightly by 1% to 194 million metric tons, mainly due to lower imports by China and Iran. However, the wheat trade is still expected to remain above the five-year average, as demand remains strong in many regions. The global wheat stocks in 2021/22 are projected to increase by 3% to 292 million metric tons, mainly due to higher stocks in China and India. However, the stocks-to-use ratio, which measures the availability of wheat relative to its consumption, is projected to decline slightly by 0.2 percentage points to 37.4%, indicating a tightening of the global wheat market.

Wheat Trade: The Future Outlook

The future outlook of the wheat trade depends on various uncertainties and challenges, such as climate change, pest and disease outbreaks, trade disputes, and policy changes. According to the Food and Agriculture Organization (FAO), the global demand for wheat is expected to grow by 1.4% per year until 2030, mainly driven by population growth and income growth in developing countries. The global supply of wheat is expected to grow by 1.3% per year until 2030, mainly driven by yield improvements and area expansion in developing countries. The global trade of wheat is expected to grow by 1.6% per year until 2030, mainly driven by increased exports from Russia, Ukraine, Argentina, and Australia.

The FAO also identifies some potential opportunities and challenges for the wheat trade in the future. Some of the opportunities include increasing demand for high-quality wheat products, such as pasta and bread; increasing demand for organic and gluten-free wheat products; increasing demand for biofuel production from wheat; and increasing regional integration and cooperation among wheat-producing and consuming countries. Some of the challenges include increasing competition from other crops, such as maize and rice; increasing volatility of prices and markets; increasing risks of climate change and extreme weather events; increasing threats of pests and diseases; and increasing trade barriers and distortions.

References:

https://en.wikisource.org/wiki/1911_Encyclop%C3%A6dia_Britannica/Grain_Trade

https://ieeexplore.ieee.org/document/7095118

https://time.com/5663621/climate-change-food-supply/

https://www.statista.com/topics/1668/wheat/
https://oec.world/en/profile/hs92/wheat
https://www.igc.int/en/grainsupdate/wheat.aspx
http://www.fao.org/3/i9166en/I9166EN.pdf

https://www.ig.com/en/trading-strategies/wheat-trading-what-is-it-and-how-does-it-work-220719
https://therobusttrader.com/wheat-trading/
https://commodity.com/soft-agricultural/wheat/trading/