Traditionally, countries in the East and South of Africa source the bulk of their grain from Russia and Ukraine with some imports coming in from Australia and Argentine to supplement their local production.
He however noted that the black sea initiative allowed some more wheat from the war-torn country to flow to Africa and increasingly now, Russian wheat is “open again and is coming into Africa.”
With the flow of grain from Ukraine and Russia remaining under disruption, Jaegar noted that there still exist quantities of German and Polish wheat from the 2022 harvest that could be exported to Africa.
Global consumption exceeds production
Globally, he noted that wheat consumption has been rising in the last several years and could surpass production in 2023.
Australia also had record harvests in 2022 while UK and EU were not lucky this time round, reporting a staggering 17MMT drop in production mostly due to the Russian invasion of Ukraine.
There was also a 10MMT drop in Argentina, which was affected by severe drought. With record low production, Argentina restricted exports to only 8.8MMT which were mostly shipped to its neighbor and key trade ally brazil.
He further noted that there is also a similar trend in the Baltic region’s exports as well as for the French exports, although France has already exported about 75% of their harvested wheat.
Conversely, in Ukraine, the supplies available for export have been dwindling since January, and it is still uncertain how the trend will go on after the black sea grain deal expires later this month, on 19th March.
Since its implementation in July 2022, the black sea grain deal has been critical in moving large amounts of Ukrainian grain exports, delivering about 23MMT of grain as of March 5 2023, according to data from UNCTAD.
In 2023, Jaeger notes that geopolitical uncertainty occasioned by the Russo-Ukrainian war is likely to be problematic, especially if Russia fails to renew the grain deal that is currently in place.
As the war continues to ravage the country and disrupt normal activities, it is forecast that Ukraine production as well as its exports potential is likely going to be negatively impacted.
On the contrary, Russian exports which have started to recover are likely to remain stable in 2023.
The Australian grain is likely to reduce in 2023 because of the return of La Nina, having the converse effect in Argentina, which has had prolonged drought and low harvests in 2022.
Additionally, there is likely to be an increase in the Brazilian harvests in 2023 making it less reliant on Argentina to supplement its domestic supplies.
In India, one of the largest wheat consumers, production of the grain is likely to rise to 115/120MT in 2023.
Another trend in 2023 is likely to be the return of China to wheat purchases from global exporters of grain, following the re-stabilization of the country’s economy after the covid19 pandemic.
In 2023, there could be a reduction in the prices of fertilizers due to lower gas prices globally. This trend could offset the recent increases in the price of wheat grain.
However, financing difficulties in importing countries could limit the market in the year, calling for cost optimization by millers in these countries.