— Plentiful supply reduce fear of shortages of wheat
— Increased production would bring global inventories to record levels
The world is awash in wheat, despite the panic in the grocery stores, and concern about the limitations on grain exports, which has arisen in recent months.
Major suppliers ranging from Russia to Romania, has restricted exports to protect supplies to the domestic market in crisis, coronavirus, part of these measures is still in effect. But it had no serious impact on trade, and the supply should increase. In many countries, waiting for a rich harvest, and this year wheat stocks in the world may reach a record level, and in 2021 to increase even more.
There is a risk that everything will change and unfavorable weather, however, concern about a shortage of grain due to isolation were short-lived. Supply is preserved, export restrictions were not very strict, in connection with the sale continue, and restricting exports of the country understand what stocks they have in abundance. Plus, the pandemic has led to a sharp drop in demand for corn.
“Big shortages of supply, — said the Director of the English analytical organization “si-Ar-Em Agricommodities” (CRM AgriCommodities) James Boulsworth (James Bolesworth). — We see the situation on the wheat market was very similar to what was in the retail market of toilet paper. There was real panic, but then it became obvious that’s all right.”
After the end of March, prices rose as consumers started to stock up on such products as flour, and Romania, Russia and Kazakhstan have imposed restrictions on exports, the market has largely restored calm and dispel anxiety about the deficit. Futures dropped to the lowest level since October last year.
Some countries have already refused from export restrictions. Last month, Romania abolished the sudden ban on the sale of grain outside of the EU, which lasted only a week, and the Ministry of agriculture of Kazakhstan said that the country from June 1, plans to end export quotas on grain and flour.
Now all attention is chained to the rich harvests in key countries producing grain, starting with Russia and ending with Canada. According to the data of the American government, in the upcoming season, global production is expected to increase by 0.5% and reach a record high. This will help to increase grain reserves by 5% to 310,1 million tons, which corresponds to a five-month volume of global demand.
“It seems that we are waiting for another rich harvest of wheat, — said OLE Hansen (Ole Hansen), head of unit of the commodity strategy in investment “Saxo Bank”. — Nothing to worry about”.
The demand for wheat is reduced also due to the fact that the outbreak of coronavirus leads to a decrease in consumption of grain. The restaurants are closed, do not operate ethanol factories for the production of biofuels from grain, stopped working part of livestock farms to reduce the demand for livestock feed. Have any surplus grain, such as corn, and this increases pressure on wheat.
However, a few weeks before the start of the harvest in many countries, the risk remains beyond the control of the States. It’s the weather. For example, the aridity of the soil, posing a threat to crops in the black sea region and in Western Europe, drought in North Africa has increased the need for imports. In the southern hemisphere countries such as Argentina are starting to sowing.
The us government predicts only a slight increase in reserves of eight of the world’s major suppliers in comparison with the season of 2019-2020 when they were the smallest in six years.
Any major weather changes that affect crops, forcing key suppliers to extend or renew the restrictions, especially if the pandemic covid-19 will not go down. Russia, which has long been creates confusion in the wheat market with their restrictions and duties, says that intends to maintain a quota and after the end of the season.
In such circumstances, the restriction of supplies from one region will give an opportunity to other suppliers to fill the void if grain will be enough. And although this year is expected to yield is not as rich as before, rains in France, which is the main supplier of wheat to the EU, gave the long-awaited water suffering from drought fields.
“We always say that June decides the fate of the harvest, — said the President of the French Association of grain exporters (France Export Cereales) Philip Housel (Philippe Heusele). — Introduced this year in other countries restrictions have shown our customers that our delivery of truly reliable.”