Imagine the loaf of bread that is a staple in many countries smaller by thirty percent and more expensive by the same amount. Instantly a scene from the old English movies based in a country like Egypt where people are queuing up for that loaf comes in front of eyes.
This scene might soon become a reality if the wheat supply does not improve. The main factor that has triggered this chaos is the Russian military operation in Ukraine because together they supply thirty percent of the total grain to the world. And currently, the movements of these grains are mostly halted as the ports from where they get exported are covered with sea mines.
When such a problem erupts there is no shortage of additional burden on the market. India has been one of the largest producers of wheat with a continuous production growth except for this year when it is going to witness a drop in production after many years due to the heatwave.
On the other end of the market, consumption is steadily and consistently growing by high single-digit. This has pushed up wheat prices by fifty-three percent since the conflict started in February 2022. In between, there was a relief as India declared to help ease off some supply pressure but due to change in production estimates it has lowered that policy to a selective and restrictive export.
The Russian President has announced that exports from Ukraine can be given but in exchange for the West removing the sanctions. This solution will be unlikely taken up by the West, leaving majority of the current harvest to be supplied by new routes that will take time. This makes September 2022 crucial as the consumption picks up due to global festivals and we need to be on alert regarding the ending stock that is already reducing quickly.