Typically grain processors buy wheat three to four months in advance. But millers in Asia, including Indonesia, the world’s No. 2 wheat importer, are currently covered for about two months, and in the Middle East, most grain processors only have up to 45 days of supplies, two millers and a trader said.

The limited supply held by flour makers reduces their buffer against any production shortfalls that would trigger a rally in world prices, with global reserves already projected to reach a nine-year low, and fuel food inflation.

Farmers are hoarding their crop as global wheat prices Wv1 have slumped to their lowest since 2020 on solid output in Australia and Argentina and on improved growing conditions in major exporting regions including the U.S. and Black Sea region.

Wheat sales in Australia, the world’s fourth-biggest wheat exporter, are running at half the pace of last year at 500,000 tons contracted for November shipment.

At the same time, farmers in the U.S. and parts of the Black Sea region are storing grains gathered earlier this year in silos, hoping for higher prices, industry players said.

“Farmers are not happy with the current price being offered to them,” said a grains trader at an international trading firm in Singapore. “Farmer selling is very slow and it is not just Australia where the harvest is going on, it is the same situation in several exporting countries.”

Farmers hold out

In the physical market, Black Sea wheat with 12.5 per cent protein is being offered at $265 (C$369.25) a metric ton, including cost and freight (C&F) to Asia, down from $275 (C$383.19) a couple of weeks ago. New-crop Australian Premium White wheat is quoted near $280 (C$390.15) a ton, C&F, down from $290 (C$404.09).

“Prices have come off pretty dramatically. And personally, yeah, I am not selling any wheat at the current stage,” said Cordell Kress, a farmer from Rockland in the northwestern U.S. state of Idaho.

“If you are not needing money right away, it is kind of just, store it or hold on to it and hope for better prices or some other problem in Russia or Australia that will cause our prices to go up here domestically.”

Kress grows primarily soft white and hard red spring varieties of wheat.

In Australia, farmers are selling other crops instead.

“You have very strong sales of chickpeas for cash flow, and now we are getting strong sales of canola into the current prices,” said Rod Baker at Australian Crop Forecasters in Perth.

Tight supply ahead

Along with lack of supply from farmers, high interest rates have deterred millers from stocking up on wheat, leaving them exposed if prices rise.

“Lower supply cover does leave us vulnerable, but with high interest rates it doesn’t make sense to hold large stocks,” said one Dubai-based purchase manager at a flour mill in the Middle East.

Even with robust southern hemisphere production, global wheat stockpiles are projected by the U.S. Department of Agriculture to shrink to a nine-year low by mid-next year.

“Wheat crops in the northern hemisphere still have to go through crucial development stages, any issues with the weather until harvest in July can trigger a rally in prices, given how tight the inventories are,” said Ole Houe, director of advisory services at IKON Commodities in Sydney.

In a slight reprieve for millers, attractive interest rates have prompted Russian farmers, who had been withholding their crops, to change tack and sell crops so they can deposit money in banks.

But top wheat exporter Russia might be running out of supplies. Moscow’s grain export quota, to be in place from February to June, could be nearly three times smaller than the 29 million tons a year earlier.

— Additional reporting by Peter Hobson in Canberra

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Winnipeg-based P+H said Tuesday the work already underway at its inland facility on Highway 21 just south of Kincardine will boost unloading speeds on grain deliveries and “expand storage capacity for farmers and customers in the region.”

P+H said the enhanced site “will be dedicated to serving the robust demand for high-quality wheat” from the company’s four southern Ontario flour mills.

The site upgrades, which are expected to be completed early next year, will be done in two phases, a company representative said Thursday via email.

The first phase will include automated systems to increase loading speeds. Those plans call for bigger receiving pits, a new dryer and wet storage system, a self-weighing kiosk for trucks, and a probing station, P+H said.

“Once completed, the new facility will offer faster unload times for producers eliminating lineups and enhancing food safety and quality control capabilities.”

Also, P+H said, self-loading capability for outbound trucks will be added, so as to “reduce wait times and improve overall efficiency.”

In the second phase, P+H said Thursday, the facility’s storage will be expanded to double its current capacity of 10,000 tonnes.

On top of the efficiency boost the upgrades will provide, “they will also benefit our customers by allowing them to unload their grain quickly and easily, reducing wait times and improving their overall experience,” Bruce Humphries, the Kincardine site’s general manager, said Tuesday in the company’s release. — Glacier FarmMedia Network

UPDATE, April 6: Article updated to include comment from P+H.

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India will allow food processors to import duty-free wheat against a commitment to export flour, the order said.

After a sudden rise in temperatures in mid-March shrivelled the wheat crop, India, the world’s second-biggest producer of the grain, banned overseas sales of the staple to secure supplies for its 1.4 billion people.

Wheat exports from India, also the world’s second biggest consumer of the staple, surged after Russia’s invasion of Ukraine hit supplies from the Black Sea region, resulting in a jump in global prices.

After banning wheat exports in May, the government of Prime Minister Narendra Modi restricted wheat flour exports in August to keep a lid on local prices.

The ban on wheat exports boosted demand for Indian wheat flour and the country’s flour exports jumped 200 per cent during April-July 2022 from a year earlier, lifting prices in the local market.

Close on the heels of the ban on overseas sales of wheat, India restricted rice exports as scant rains in the east affected planting of the most water-thirsty crop.

India’s protectionist measures have stoked fears of food shortages in some of the world’s most needy and vulnerable countries in Asia and Africa.

— Reporting for Reuters by Mayank Bhardwaj in New Delhi.

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Around 700,000 tonnes of wheat haven’t been released from customs, causing around 80 per cent of mills producing commercially sold bread, pasta, and other goods to “cease activity completely,” according to a Sept. 26 letter from the Federation of Egyptian Industries’ Chamber of Cereals to the supply minister.

While global wheat prices have fallen to their levels before the Russia-Ukraine war, prices in Egypt have risen due to depleting stocks, said Hussein Boudy, the chamber’s deputy head.

Egypt’s importers can no longer replenish their wheat stocks amid a dollar shortage caused by a rising import bill and decreasing tourism revenues from two of its largest markets — Ukraine and Russia. Loss of confidence in the Egyptian pound by investors also contributed to the shortage.

Wheat prices rose by around 10 per cent to 9,000 Egyptian pounds (C$618.42) per tonne in the last two weeks, Boudy said, while some traders reported steeper rises of up to 15 per cent. Flour also rose by 18 per cent to 11,500 pounds (C$790.15) per tonne, traders said.

“Bigger mills… used to store for a month and a half or two, but today some mills have stocks for seven to five days.” said Walid Diab, managing director of the Egyptian Millers Company. “We are in the red zone.”

Boudy added that one company had requested to purchase from the state grains buyer’s strategic reserves.

The government “will work on the issue” of declining private sector wheat stocks, Egypt’s supply minister told Reuters on the sidelines of a conference on Sunday.

Supply crunch

As foreign currency reserves dwindled, authorities introduced rules in March that restricted access to dollars for imports.

Although wheat and other strategic goods were exempted, private sector traders say wheat import payments have nearly stopped since September and no new contracts have been signed.

Imports of corn, poultry and soybeans have also been affected, traders say.

“Suppliers understand that there’s an issue with Egypt but now they don’t want to do new business until the old stocks are released,” said one local trader.

Since early September, only 2,000-3,000 tonnes of wheat got through customs, the Chamber’s letter said. Monthly private sector needs are estimated at around 450,000 tonnes, and, according to the Chamber, mills need the immediate release of around 300,000 tonnes.

The supply crunch has caused a spike in the price of bread in some bakeries, said Hesham Soliman, a Cairo-based private sector trader.

There were no signs of shortages at bakeries, said Attia Hammad of the Cairo Chamber of Commerce, though he said some bakeries could hike prices or decrease the weight of loaves because of rising costs.

Egypt, with a population of 104 million, is typically the world’s biggest wheat importer. Private sector imports recently overtook those by the state buyer, which purchases wheat for a large subsidized bread programme.

— Sarah El Safty is a Reuters commodities correspondent in Cairo.

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The decision may spur a broader global discussion about genetically modified wheat as prices rise and concerns grow that more severe weather could threaten food security. Genetically modified (GMO) soybeans and corn have long been accepted on global markets, but are primarily fed to livestock rather than humans.

Brazil’s biosecurity agency CTNBio said its unanimous decision applied only to wheat flour. Millers had threatened to boycott Argentine grains and said they would seek legal recourse to reverse the flour decision.

“The decision was by a technical agency, but it is important to see what the Brazilian market wants. It looks like consumers in Brazil do not want GMO wheat,” said Gustavo Idigoras, head of Argentina’s CIARA-CEC chamber of grains exporters.

Brazilian flour milling association Abitrigo said it would ask the president’s office to convene a national biosecurity committee to review the decision. It said it was also evaluating legal options to suspend the ruling.

The group had already threatened to stop buying Argentine wheat if sales of the drought-resistant wheat were approved in Brazil, vowing to turn to other countries for supplies.

“It could mean a surge in demand for U.S. wheat if they reject buying it if they fear consumer backlash,” said Arlan Suderman, chief commodities economist at StoneX. “Ultimately, it comes down to the consumer. What is the consumer willing to accept?”

U.S. wheat futures hit their highest in nearly nine years on Thursday due to tight global supplies, while European wheat futures climbed to a 13-1/2 year peak.

U.S. Wheat Associates, which promotes U.S. wheat exports, did not have an immediate comment. The group has previously said it will support commercialization only after approval in major markets and the creation of rules for handling low levels of GMO wheat mixed in with non-GMO wheat.

Just a fraction of Argentine farms have tried out the wheat variety resistant to drought and the common herbicide ammonium glufosinate developed by Bioceres SA, whose partner Tropical Melhoramento Genetico filed the request with CTNBio.

A source at Bioceres said it would seek approval from other key markets before seeking to market the GMO wheat commercially.

Some 55,000 hectares (135,910 acres) in Argentina have been planted with the GMO wheat on an experimental basis, company disclosures show.

Argentine grains exporters have asked the government to identify which farmers are growing the GMO wheat so they could stop buying from those areas.

Santiago del Solar, who grows wheat in the bread-basket Argentine province of Buenos Aires, said the ultimate decision remains in the hands of Brazilian millers and consumers.

“It’s fine that the regulators said yes, but we sell wheat to the milling industry and consumers. If they don’t accept GMO wheat, we still have a big, big problem,” del Solar said.

Argentina exported a total of 8.424 million tonnes of wheat through Oct. 19 this year, with some 50 per cent going to Brazil, which relies on its southerly neighbour for most of its wheat imports.

Argentine farmer Francisco Santillan, who also grows wheat in the province of Buenos Aires, said he will wait to see whether other countries approve imports of the wheat variety before he starts planting it.

“I think the reasonable thing to do, no matter how much Brazil accepts it, is to wait a year to see how the issue evolves in other countries that buy wheat from us,” he said.

— Reporting for Reuters by Ana Mano in Sao Paulo, Hugh Bronstein and Maximilian Heath in Buenos Aires and Mark Weinraub and Julie Ingwersen in Chicago.

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U.S. and Canadian farmers are bracing for a sharply smaller spring wheat harvest due to the driest conditions in decades, as severe weather damages crops across the hemisphere, from heat scorching cherries in the U.S. Pacific Northwest to frost chilling sugarcane in Brazil.

While overall global wheat stocks are large, the drought affects mainly the high-protein spring wheat crop that millers such as Archer Daniels Midland Co and bakers including Grupo Bimbo rely on to produce the texture and moistness in baked goods that consumers expect.

Importers from Britain to China must pay up for limited North American harvests or turn to other suppliers like Australia and Russia.

Minneapolis spring wheat futures are trading near nine-year highs, leaving Camas Country Mill in Eugene, Oregon braced to pay more, said owner Tom Hunton. He plans on passing his higher costs on to the mill’s bakery customers.

Camas Country will rely on stockpiled wheat from last year to top up this year’s supplies to produce flour. But Hunton worries about the drought carrying into next year.

“This isn’t sustainable for anyone,” he said.

In Canada, bread prices may rise as much as 6.5 percent by late this year, said Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University in Halifax, Nova Scotia.

U.S. prices are more difficult to forecast, since flour prices dropped earlier this year as lockdowns eased and fewer people baked at home, he said.

Steep dropoff

Canada’s spring wheat crop is expected at between 16 and 20 million tonnes, well off last year’s 25.8 million, said Bruce Burnett, director of markets and weather information at MarketsFarm. Just 16 percent of spring wheat in Saskatchewan and 21.6 percent in Alberta is in good or excellent condition, according to provincial governments.

The U.S. spring wheat harvest is expected to drop 41 percent from a year ago to the lowest production in 33 years, according to the U.S. Department of Agriculture (USDA).

The USDA on Monday estimated that just 10 percent of the country’s spring wheat crop was in good or excellent condition, down from 73 percent a year ago and the lowest rating for this point of the season since the 1988 drought.

In Montana, where the USDA has deemed 42 percent of spring wheat in very poor condition and another 43 percent in poor shape, growers are buying out of sales contracts inked earlier in the season with elevators because they will not have wheat to deliver.

“I cancelled more contracts last week than I wrote. If they don’t have a crop, they have no choice,” said one commercial grain buyer who declined to be named as he is not authorized to speak to media.

Importers adjust

China, which normally buys modest amounts of North American spring wheat to make high-quality bread and baked goods, will likely buy more from other suppliers such as Australia, said a China-based trader with an international trading house.

Russia may make up some of North America’s shortfall in the global market. Southern Russia, the country’s main wheat-producing region, is producing wheat with higher protein than a year ago, Dmitry Rylko, head of the Moscow-based IKAR consultancy, said.

Spring wheat from Russia and Kazakhstan, however, does not have the same characteristics important for baking, such as gluten strength, as U.S. hard red spring wheat and Canadian Western Red Spring, said Mike Spier of U.S. Wheat Associates, a trade group that promotes U.S. wheat overseas.

The drought will force bakers to change how they work with flour, adding more water to compensate for dryness and making other adjustments to avoid producing crustier-than-usual buns, said Glenn Wilde, owner of Harvest Bakery in Winnipeg, Manitoba.

United Kingdom baker Warburtons buys half of its wheat from Canada, about 200,000 tonnes annually, grown by farmers to the company’s specifications. The company will pay more this year to ensure it acquires enough Canadian spring wheat, said Adam Dyck, Warburtons’ Canadian program manager, adding that many kernels may be too shrivelled to mill into flour.

Dyck said he is accustomed to seeing pockets of drought on the Prairies, but nothing this widespread.

“It’s pretty unique for this generation,” he said.

– Reporting by Rod Nickel in Winnipeg and Karl Plume in Fargo, North Dakota; additional reporting by Julie Ingwersen in Chicago; Sybille de La Hamaide in Paris, Polina Devitt in Moscow, Hallie Gu in Beijing, Pavel Polityuk in Kyiv.

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There were also year-to-year increases in the other categories tracked by the federal agency, while whole wheat and graham flour production decreased.

Of the total wheat milling, durum made up a small percentage in 2020, accounting for 7.2 per cent of the wheat processed. However, there was a greater increase in the amount of durum milled from year-to-year than over the last few years. The 235,150 tonnes of durum milled was up 7.8 per cent over 2019, while previous year-to-year increases since 2017 have been 0.3 to one per cent.

Excluding durum, wheat milling came to nearly 3.032 million tonnes in 2020 — a 1.6 per cent rise over that in 2019.

The amount of total flour produced bumped up 1.5 per cent from 2019, at about 2.489 million tonnes. When durum is excluded, the wheat flour produced in 2020 was approximately 2.308 million tonnes, for an increase of nearly 1.2 per cent over the previous year. Flour made from durum only rose six per cent in 2020 at 181,058 tonnes.

Whole wheat and graham flour produced saw a notable step back in 2020, dropping 30.7 per cent at 87,718 tonnes.

At just below one per cent, total millfeeds (a byproduct containing flour along with bran and germ) produced saw an increase in 2020, coming to 748,197 tonnes.

The total amount of all wheat milled in Canada in 2020 represents 9.3 per cent of total wheat produced in the country. When compared to the last few years, the amounts of total wheat and total flour produced has increased, but the gains in wheat production outpaced those for flour produced.

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Raoul Nehme told Reuters a day after Tuesday’s devastating explosion that Lebanon needed reserves for at least three months to ensure food security and was looking at other storage areas.

The explosion was the most powerful ever to rip through Beirut, a city torn apart by civil war three decades ago. The economy was already in meltdown before the blast, slowing grain imports as the nation struggled to find hard currency for purchases.

“There is no bread or flour crisis,” the minister said. “We have enough inventory and boats on their way to cover the needs of Lebanon on the long term.”

He said grain reserves in Lebanon’s remaining silos stood at “a bit less than a month” but said the destroyed silos had only held 15,000 tonnes of the grain at the time, much less than capacity which one official put at 120,000 tonnes.

Beirut’s port district was a mangled wreck, disabling the main entry point for imports to feed a nation of more than six million people.

Ahmed Tamer, the director of Tripoli port, Lebanon’s second biggest facility, said his port did not have grain storage but cargoes could be taken to warehouses two km away.

Alongside Tripoli, the ports of Saida, Selaata and Jiyeh were also equipped to handle grain, the economy minister said.

“We fear there will be a huge supply chain problem, unless there is an international consensus to save us,” said Hani Bohsali, head of the importers’ syndicate.

U.N. agencies are meeting on Wednesday to coordinate relief efforts for Beirut, Tamara al-Rifai, a spokeswoman for the Palestinian refugee agency UNRWA, told Reuters from Amman.

“People are extremely poor, it’s increasingly difficult for anyone to buy food and the fact that Beirut is the largest port in Lebanon makes it a very bad situation,” she said. “We are looking at Tripoli, but it is a much smaller port.”

Reserves of flour were sufficient to cover market needs for a month and a half and there were four ships carrying 28,000 tonnes of wheat heading to Lebanon, Ahmed Hattit, the head of the wheat importers union, told Al-Akhbar newspaper.

Lebanon is trying to transfer immediately four vessels carrying 25,000 tonnes of flour to the port in Tripoli, one official told LBCI news channel.

An Egyptian-operated ship was unloading 5,000 tonnes of Ukrainian wheat at the port at the time of the blast, but the cargo is “in good condition,” the shipping company’s operations director told Reuters Wednesday.

Two Syrian crew members aboard the Mero Star were seriously injured in the blast and others were wounded, Farid Hashem said.

— Reporting for Reuters by Ellen Francis, Tom Perry and Dahlia Nehme in Beirut, Maha El Dahan in Dubai and Nadine Awadalla in Cairo, additional reporting by Jonathan Saul in London and Stephen Farrell in Jerusalem.

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The long-awaited flour mills sale was one of the first privatizations the kingdom planned as part of a wide-reaching overhaul of its economy.

The first milling company was awarded to Raha AlSafi consortium at 2.027 billion Saudi riyals (C$734.9 million), while the third mill went to Alrajhi-Ghurair-Masafi consortium for 750 million riyals, a statement by the National Center for Privatization and PPP (NCP) and the Saudi Grains Organization (SAGO) said.

The Raha AlSafi consortium was led by Saudi Arabian firm Almutlaq Group and also including Al Safi, Abunayyan Holding and United Arab Emirates-based Essa Al Ghurair Investment, said a source familiar with the matter, adding investment bank Canaccord Genuity acted as the financial adviser.

Alrajhi-Ghurair-Masafi included Saudi Arabia’s Al Rajhi and Al Ghurair Foods of the United Arab Emirates, the source said. The final financial bids were submitted on Sunday.

The privatization process had attracted initial interest from some of the world’s largest agribusiness companies, including Archer Daniels Midland and Bunge and was seen as a litmus test for other large state asset sales to follow.

But the source familiar with the matter said the bidders had mainly been from the Gulf, adding that Louis Dreyfus had been involved, before later dropping out.

The grain mills on sale come under the kingdom’s monopoly state grain buyer SAGO, one of the world’s largest wheat and barley importers.

“The crucial piece of information to know going forward is whether any of these companies will eventually be allowed to import their own wheat as opposed to receiving it from SAGO,” said a Middle East-based industry expert.

The qualification phase for the second and final stage of the privatization of the flour milling sector will launch shortly and include the sale of the second and fourth milling companies, according to the statement.

The lengthy process which started in 2016 has discouraged some potential bidders, according to grain industry sources.

HSBC is acting as the sole financial advisor for the process.

— Reporting for Reuters by Maha El Dahan and Saeed Azhar in Dubai and Tom Arnold in London.

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Soybeans fell more than two per cent, the most in 2-1/2 weeks, and most corn contracts posted fresh life-of-contract lows as worries over burdensome supplies weighed on prices.

News that U.S. President Donald Trump extended coronavirus emergency measures through the end of April drove wheat lower, despite recent strong demand from flour millers and global importers.

A firmer U.S. dollar against a basket of currencies added pressure to grains, as it makes dollar-denominated commodities costlier for holders of other currencies.

“Wheat consumption has been very good lately, so it’s surprising to see the wheat market getting beat up as bad as it is,” said Jack Scoville, analyst at the Price Futures Group. “People are stocking up. While that will eventually pass, I’m not too sure it’s passed yet.”

Chicago Board of Trade (CBOT) May wheat dropped 18-1/2 cents to close at $5.50-1/4 a bushel. The 3.25 per cent drop was the largest for a most-active contract since Aug. 12.

May soybean futures settled down 23-1/4 cents to $8.62-3/4 a bushel.

After falling to within 1-1/2 cents of a contract low, May corn ended down six cents at $3.34-3/4 a bushel, extending prior-session losses fueled by a larger-than-expected U.S. plantings forecast from the U.S. Department of Agriculture (USDA). All other corn contracts either matched previous contract lows or set new ones.

Corn has been hammered by falling energy markets as demand from ethanol producers, which consume more than a third of the U.S. crop, has plunged.

The U.S. Energy Information Administration on Wednesday said ethanol output fell by 165,000 barrels per day in the past week to 840,000 bpd.

USDA surprised the corn market on Tuesday by projecting 2020 U.S. plantings at 97 million acres, well above an average trade estimate of 94.3 million in a Reuters poll prior to the report.

The agency pegged soybean plantings at 83.51 million acres, below market expectations.

After drawing support in recent days from concerns that the coronavirus epidemic would disrupt supplies of soy from South America and palm oil from Malaysia, oilseed markets focused on the threat to demand.

Oilseeds are reliant on demand for vegetable oils from now-shuttered restaurants in some countries and from biodiesel producers.

— Reporting for Reuters by Christopher Walljasper in Chicago; additional reporting by Karl Plume in Chicago, Gus Trompiz in Paris and Colin Packham in Sydney.

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