US and China Dispute Transforming Wheat Market
One of the significant issues in the global wheat market is the ongoing dispute between the US and China. Initially, the US accused China of distorting global wheat prices by going over the subsidy payment commitments made with the WTO. In this regard, a WTO panel urged China to revise its subsidy policies. Further, China claimed to oblige by capping wheat procurement to 37 million tonnes. But, the USA isn’t happy, as the cap is 40% higher than the average purchases made in the last five years. Thus, the US urges WTO for permission to put tariffs of $1.3 billion on Chinese wheat.
The decision made by WTO regarding the same and subsequently, the global demand and supply situation will have a marked impact on wheat prices.
UK Wheat Prices Hike with Lowest Harvest in 40 years
The United Kingdom had the worst wheat harvest in the past 40 years due to unfavourable weather conditions. To begin with, the climate during Spring was very sunny and led to drought in many places. Contrarily, February turned out to be one of the wettest months in the year, and this was after a harsh winter that had already made the farmlands wet. Because of heavy rains last October, only 40% of the usual crop was planted. Further, the UK also battled storms like Ciara and Dennis.
Also, the low harvest led to an increase in prices of bread and flour. Furthermore, the possibility of a no-deal Brexit adds to the worries of wheat producers as WTO might impose tariffs on them.
The National Farmers Union also mentioned that production might go down by a third. Additionally, the current yield is the lowest in at least 30 years, says, Tom Bradshaw (VP).
Therefore, the adverse weather conditions, along with the uncertainties of Brexit and coronavirus pandemic, has dramatically impacted the wheat production and prices in the UK.
Erratic Weather Affecting Wheat Crop in Argentina
Unpleasant weather conditions significantly impacted Argentinian wheat production. Buenos Aires Grain Exchange reported that the recent frost conditions have made wheat cultivation impossible in many northern regions like Cordoba and Santa Fe. Along with this, the Rosario Stock Exchange has cut the wheat production estimates from 22 million mt to 18.9 million mt. Concomitantly, Argentina also deals with locusts. But analysts agree that the weather is the major issue right now.
France Export Boom Despite Low Harvest
France as well had a disappointing harvest season this year. However, they have benefited from increased export demand from China. According to port data, around 200,000 tonnes of French Wheat is ready for shipment. Nathan Cordier, Consultancy Agritel said that they were thankful for the Chinese demand as they don’t export much elsewhere. This could be considered as China looking to fill its import quota amidst pressure from WTO over the dispute with the US.
In conclusion, distressing weather has affected global wheat production. But, France has managed to keep up exports because of high demand from China. Further, the decision of the WTO regarding the US-China case will also be of paramount importance.