The global crisis in the grain market, foretold in recent months, unfortunately finds dramatic confirmation. (1) About 6 million tons of durum wheat are missing. And without Grain Pass, the Italian semolina, flour and pasta industries grind to a halt.
Wheat, semolina, pasta. Production chain under threat
Official commodity exchange listings thus flew, from 280 to 525 euros/ton between May and October. And it is still hard to negotiate trades below €560-570/ton. Durum wheat semolina, as a result, has seen an increase of about €0.40/kg in six months.
Added to the higher raw material costs are the equally significant costs of gas, electricity and packaging. Meanwhile, the GDO in Italy tries to erect an anti-inflationary trench that neglects, among other things, what is happening in the western quadrant of the planet. (2)
Between the anvil and the hammer are the milling industries and especially the pasta industries, from medium-sized to micro enterprises. Like other productive sectors for that matter. All awaiting, among other things, the faithful transposition of EU dir. 2019/633 on unfair trade practices. (3)
Food price indexes, context
FAO Food Price Index
(FFPI), the FAO Food Price Index, averaged 130 points as of September 2021. Up 1.5 points (+1.2 percent) over August and 32.1 points (+32.8 percent) over September 2020. The latest increase in FFPI, it should be noted, was largely driven by higher prices of most grains and vegetable oils. Dairy and sugar prices were also firmer, while the meat price sub-index remained stable.
FAO Cereal Price Index
, the FAO General Cereal Price Index, itself averaged 132.5 points in September. +2.6 points (+2%) compared to August and by 28.5 points (+27.3%) compared to September 2020. Wheat stands out above all with an increase of +4% over the previous month and +41% over September 2020.
‘The limited commodities available in international markets, in the face of sustained demand, has continued to push up wheat prices.’ (4)
Global wheat market, October 2021
AMIS(Agricultural Market Information System) processes data collected from the 10 international organizations that participate in its secretariat (FAO, IFAD, IFPRI, IGC, OECD, UNCTAD, World Bank Group, WFP, WTO, GLAM). The trend of internationalwheat (wheat) prices is well understood in the graph below, which introduces the AMIS 7.10.21 report. (4) And it also deserves to be observed over a broader historical span, as proposed by Macrotrends. (5)
Global production and stocks
As feared, drought has hit wheat crops hard this season in the top producing countries. Canada -38%, Russia -13%, United States -7%. In the EU, on the other hand, it was bad weather that caused losses and poor wheat quality, especially in France where purchases already optioned from China were cancelled. The improved quality of wheat in Russia, on the other hand, has increased its attractiveness to which, however, is matched by lower than expected supply. And the pressure on price lists increases.
Global stocks of wheat could thus fall below opening levels in the 2021/22 marketing season. Down to the lowest level in more than two decades, the AMIS report warns. ‘Which is a worrying sign of supply shortages in world markets, raising the possibility of further increases in wheat prices this season.’ In fact, demand is still increasing and ‘at the end of the agricultural year, ending stocks of wheat will be lower than last year by about 6 million tons‘. (7)
Record question
On the demand side ‘food consumption of wheat continues to increase at almost the same rate as population growth,’ AMIS points out. On a topical note, ‘the use of wheat for feed has intensified significantly from the previous season, largely due to limited supplies and high prices of the more typical feed grains.’
Wheat utilization reached an all-time high in the 2020/21 season (July-June) and will increase again, +2.4 percent according to estimates, in 2021/22. With an additional variable and risk related to poor crop quality, which in turn affects the availability of wheat. Where mycotoxin contaminations detected in France will mean that the grains cannot be used in food and feed.
Interim conclusions
The current scarcity of wheat supply on the global market must be evaluated as an unprecedented historical event with a serious impact on the most characteristic productions of Made in Italy food as well as consumption.
Strains on the energy market-oil, gas and consequently fertilizer-and on logistics (port congestion, supply chain disruptions, high freight rates) may exacerbate the situation.
The ban on sales below cost must also be enforced in Italy from 1.1.21, the deadline for implementation of theUnfair Trading Practices (UTPs) directive in all member states, regardless of any delays or deviations in its transposition.
Dario Dongo
Notes
(1) Dario Dongo. Durum wheat, global crisis in sight? Italian pasta production at risk. GIFT (Great Italian Food Trade). 12.8.21, https://www.greatitalianfoodtrade.it/mercati/grano-duro-crisi-globale-in-vista-a-rischio-la-produzione-italiana-di-pasta
(2) Colby Smith. Federal reserve poised to begin tapering as early as next month. Financial Times. 13.10.21, https://amp.ft.com/content/c52493ff-cc51-4e69-b532-acbd0bdee8c4
(3) Dario Dongo. Unfair trade practices and the European delegation law, a critical analysis. GIFT (Great Italian Food Trade). 4/24/21, https://www.greatitalianfoodtrade.it/mercati/pratiche-commerciali-sleali-e-legge-di-delegazione-europea-analisi-critica
(4) FAO Food Price Index. 7.10.21, https://www.fao.org/worldfoodsituation/foodpricesindex/en/
(5) AMIS. Market monitor. 7.10.21, http://www.amis-outlook.org/fileadmin/user_upload/amis/docs/Market_monitor/AMIS_Market_Monitor_current.pdf
(6) Wheat prices. 40 years historical chart. Macrotrends. https://www.macrotrends.net/2534/wheat-prices-historical-chart-data
(7) Sask Wheat. Wheat Market Outlook and Prices. Report 12.10.21, https://saskwheat.ca/wheat-market-outlook-and-prices
Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.
