Global wheat prices are poised for recovery to set a fresh season-average record in 2022-23 as supplies tighten further in key exporting countries, Abares said, even as it lifted its forecast for world production.

Wheat prices “have been easing since the end of May”, losing gains made in a surge following Russia’s invasion of Ukraine, Abares, the official Australian agriculture bureau said, citing pressure on the market from the supply boost created by the northern hemisphere harvest.

Values of hard red winter wheat in US Gulf ports, which Abares uses as its indicator price, stood at $388.86 in late August, on an 11.5$ protein basis, down by 28% from their mid-May high, according to data from industry group US Wheat Associates.

“The prospect of renewed Ukrainian grain shipments on account of the negotiated Black Sea trade corridor agreement has also applied downward pressure to prices.”

‘Prices are expected to rise’

However, the bureau forecast hard red winter wheat prices averaging $404 per tonne for 2022-23 overall, implying a recovery in values over the rest of the season, as ends in June 2023, and the highest price on record.

The current record, of $396 per tonne, was set in 2021-22.

This season so far, prices have averaged less than $382 per tonne, GrainPriceNews analysis of US Wheat Associates data shows.

“Prices are expected to rise in the coming months,” the bureau said, citing support “due to northern hemisphere harvest supplies dissipating”.

Production vs consumption

The comments came even as Abares raised its forecast for world wheat output this season by 3.5m tonnes to 779.6m tonnes, in part on improved prospects for the domestic harvest, but also for increased expectations for output in the likes of Russia and the US.

However, this would remain behind world consumption, forecast expanding by 1.6m tonnes year on year to 783.8m tonnes.

“Demand for milling wheat is expected to remain strong in 2022-23 given that milling wheat has few substitutes and is used to produce staple food products such as bread, pasta and noodles.”

Indeed, “although total world production is forecast to increase, world demand for wheat is expected to outpace supply leading to a year-on-year decline in closing stocks of 2%.

“This is expected to support prices for the remainder of 2022-23.”

Exporter stocks

The bureau also stressed the prospect of a further shrinking in supplies to the tightest in a decade in major exporting countries, whose stocks are particularly important for setting world prices.

“Year-on-year increases in Canadian, US and Russian Federation production are expected to more than offset falls in Australian, EU, Ukrainian and Argentinean production.

“However, total consumption and exports are expected to outpace supply in the major wheat exporting countries, including Argentina, the European Union, and the United States.

“As a result, closing stocks in key major exporting countries are forecast to fall in 2022-23, leading to elevated prices.”

In Australia itself, wheat inventories will shrink by 16.8% to 1.51m tonnes in 2022-23, on an October-to-September basis – the lowest in 25 years on Abares data.