Dive Brief:
- Global wheat production is set to drop for the first time in five years as drought conditions envelop major grain producing nations, the U.S. Department of Agriculture said Tuesday.
- The USDA lowered its forecast for wheat supply by 7.2 million metric tons to 1.05 billion due to an expected decline in production for Australia, Canada, Argentina and the European Union.
- If realized, it would be the first year-over-year decline in global wheat production since the 2018/19 crop year. The forecast is a sharp reversal from July, when USDA had expected production to reach a record.
Dive Insight:
A decline in wheat production may make some countries reliant on Russia and the Ukraine, making it critical for a global grain shipping agreement to be reached.
Russia quit the Black Sea Grain Initiative in July, which had allowed Ukraine to ship wheat despite a wartime blockade. Since the deal's collapse, Russia has escalated attacks against Ukraine by targeting grain storage facilities and shipping ports.
Global leaders are scrambling to find alternative routes for Ukraine's grain exports, with Turkey calling on countries at the G20 summit to work with Russia to find an agreement.
A G20 declaration on Sunday called for "the immediate and unimpeded deliveries of grain" from Russia and the Ukraine, noting it's necessary to address food insecurity in under-developed countries.
Extreme weather from droughts to floods is upending wheat harvests around the world. In China and the EU, more wheat was being used as feed after excessive rainfall degraded quality, according to a briefing from the USDA’s National Agricultural Statistics Service.
With wheat in a critical stage of reproduction, the next few weeks will determine whether there will be further production declines, according to Mark Jekanowski, chairman of USDA’s World Agricultural Outlook Board. World ending stocks of wheat are currently expected to decline to 258.6 million, the lowest since the 2015/16 crop year.
The estimation for U.S. wheat production remains unchanged at 47 million metric tons, though drought conditions have also affected production and price.
