SOUTH African wheat prices are still at comfortable levels, according to the Agricultural Business Chamber (Agbiz).
Although South Africa is traditionally a net exporter of agricultural products, wheat is the second most valuable imported food product after rice. Last year, South Africa’s wheat imports were valued at $493 million (about R7.3 billion), which equated to 8 percent of the overall agricultural import value of $5.9bn.
Global wheat stock remained tight, but prices might not fall significantly despite increased production in the 2021/22 season, the chamber said. Agbiz chief economist Wandile Sihlobo said they expected a sideways movement in prices, which would not present a major risk of inflation to consumers.
“South African wheat prices have also lifted somewhat over the past few months in response to global dynamics. However, prices are still at comfortably lower levels than last year. For example, on August 12, the South African wheat spot price was R5 410 per ton, down by 10 percent year-on-year,” said Sihlobo.
Global wheat stocks could remain tight despite the expected increase in production. The International Grains Council (IGC) forecasts a mere 1 percent increase in 2021/22 global wheat stocks to 280 million tons.
“This has implications for prices. The tight stock levels are what cause volatility in global wheat prices whenever there are reports of unfavourable weather conditions or logistic glitches in major exporting countries. This happens even if such news later turns out to be inconsequential to the market fundamentals,” Sihlobo said.
Agbiz said the start of the 2021/22 global wheat production season could be categorised as mixed.
The IGC had lowered its estimate for Russia’s 2021/22 wheat production by 5 percent year-on-year to 81 million tons. “This means Russia’s wheat exports could potentially fall by the same magnitude to around 35 million tons,” Sihlobo said.
Canada and the US were other major wheat-producing and exporting countries that have had a bad start to the 2021/22 season. Consequently, their exports could also fall by roughly similar magnitudes to 18 million tons in Canada, and 25 million tons in the US, according to data from the US Department of Agriculture (USDA).
After a solid rebound from the drought and fires to a good season in 2020/21, Australia had another dry season in 2021/22. The IGC now forecasts a 13 percent decline in Australia’s wheat production to 30 million tons.
Still, the USDA believes exports would be roughly unchanged in 2021/22, at just under 25 million tons.
The EU was another crucial wheat-producing region whose harvest recovered by 11 percent in the 2021/22 season to an estimated 138 million tons. The improvement in yields resulting from favourable weather in France was a major boost to the region’s wheat harvest.
Argentina, China and India were also among the countries that were seeing production improve this season because of an expansion in area plantings, combined with favourable weather.
Sihlobo said the improvement in production in these countries had offset the decline in the likes of Russia and Canada. As such, both the USDA and the IGC were optimistic about 2021/22 global wheat production.
The IGC forecast 2021/22 global wheat production at a record 788 million tons, up 2 percent. The USDA was slightly cautious, placing the forecast at 777 million tons.
At the same time, consumption was rising faster, particularly in the global animal feed industry and for other industrial uses.
BUSINESS REPORT