Russian crisis won’t impact global wheat supplies, prices

NEW DELHI: The ongoing wheat crisis in Russia will not jeopardise world supplies gravely or impact global wheat prices seriously this year, says a study from an influential research body even as prices rallied sharply last month. The sharp run-up in prices could, in fact, allow India to sell some of its wheat stock.

One of the worst droughts in Russia in decades has destroyed 20% of its wheat crop, and there are fears that more fields may be lost due to recent wildfires in the western part of the country. The country accounts for roughly 8% of the world wheat production. This means the current loss could be equivalent to a 1.6% decrease in the global wheat supply.

The study by the International Food Policy Research Institute (IFPRI) projects a drop in the 2010-11 wheat production, significantly, in India and Canada, two top producers, besides Russia but this could be made up by an increase in the wheat output of the USA and China, keeping global inventories sufficient and secure. A sober analysis of market fundamentals shows that global supplies are secure and that “some market participants” are “over-reacting to the events in Russia,” the study adds.

A supply shock of less than 2% of the world’s production has occurred for one, the study says, pointing also the USA’s store of more than 26 million tonnes, a quantity that is three times the expected decrease in Russian wheat exports.

The stores are bigger than the total Russian exports last year, around 21 million tonnes. That apart, Australia expects to increase its exports by one million tonnes from 14 million tonnes last year.

Again, between the FAO and the USDA, wheat production estimates are pegged between 661 million tonnes (only 3% lower than last year’s output) and 651 million tonnes. Sufficient inventories are available. Correspondingly, there would be no worrisome increase in the price of bread or cereals.

The concerns over Russia’s production fuelled a marked increase, more than 24%, in spot wheat prices in July.