As extreme weather events spread across vast regions, crops in North and South America, Europe, and Australia face production declines, making food production increasingly vulnerable. Moreover, the escalating tensions between Russia and Ukraine have once again made food security a primary concern in food trade and diplomacy.
The hopeful expectations of a bountiful harvest in Russia's Siberian region are still unable to alleviate the food security concerns brought about by the conflict between Russia and Ukraine. Especially since Russia, in mid-July, withdrew from the Black Sea Grain Initiative that allowed Ukrainian grain exports, and with its airstrikes on Ukrainian ports, global food supply and security are in a precarious situation.
Reuters analysis of the reserves and crop usage in the seven major exporting countries shows that wheat reserves for 2023-2024 could drop to a 16-year low. Excluding Russia, the US, and the EU, this ratio is expected to hit the lowest level since 1960, indicating that wheat supplies are tight in key exporting countries like Australia, Canada, and Argentina.
Dan Basse, president of the consulting firm AgResource Company, stated that the tension between Russia and Ukraine will cause significant price volatility for wheat and other crops due to the lack of surplus supplies for effective buffering. Previously, wheat prices had reached their largest single-day gain since the outbreak of the Russia-Ukraine conflict in 2022, triggered by Russia's withdrawal from the Black Sea agreement and its airstrikes on Ukrainian ports.
Alexander Karavaytsev, a senior economist at the International Grains Council, mentioned that the supply risks in the Black Sea show signs of spreading to Russia, potentially affecting wheat supplies from Russia and Ukraine, which account for a third of global wheat trade.
Additionally, the planted area in Argentina was below initial expectations, and crop quality issues in parts of Europe, as well as weather problems in the USA and Canada, all contribute to the tight supply of wheat and other crops. Data from the US Department of Agriculture shows that, affected by extreme weather, wheat reserves in the US, Canada, Australia, Ukraine, Russia, Argentina, and the EU for 2023/2024 have dropped to the lowest levels in decades.
Meanwhile, extreme weather in the northern US and Canada has reduced the harvest of protein-rich spring wheat and durum wheat. Kelly Goughary, a senior research analyst at Gro Intelligence, said that Canada's drought situation is similar to 2021-22, when production fell about 37% from the previous year. The production of spring wheat and durum wheat in the US will decrease by more than 5% compared to last year.
Stephen Nicholson, a global industry strategist for grains and oilseeds at Rabobank, said the EU needs a bumper harvest to effectively compensate for last year's reduction and the uncertainty of Black Sea wheat supply. However, consulting firm Strategic Grains stated that it is difficult for the EU to make up for the supply gap caused by the Russia-Ukraine conflict and extreme weather.
Furthermore, wheat production in Australia and China is also pessimistic. The Australian Department of Agriculture stated that the country's wheat production would decrease by 34%. Meanwhile, affected by extreme weather conditions like heavy rain, China's summer wheat production has seen its first decline in seven years.
