As global wheat prices soar, consumers look for cheaper alternatives

Global wheat consumption in July-December could drop by five percent to eight percent from a year ago, analysts, traders and millers say.

Global wheat consumption is headed for its biggest annual decline in decades as record inflation forces consumers and companies to use less and replace the grain with cheaper alternatives, amid growing food insecurity.

Consumers may face even higher wheat prices in the second half of 2022 as importers, who until now have supplied cargoes bought several months earlier at cheaper prices, pass on the costs from when wheat prices scaled decade highs in May.

Global wheat consumption in July-December could drop by 5%-8% from a year ago, analysts, traders and millers say, much faster than the U.S. Department of Agriculture’s forecast 1% contraction.

“There is going to be a drop in wheat demand for animal feed in Europe and China. Wheat demand for human consumption has also slowed in key importing countries around the world,” said Erin Collier, an economist at UN’s Food and Agriculture Organisation.

“High prices have raised food security worries in parts of Asia and Africa where countries are not able to secure enough supplies from the international market.”

Millions are facing mounting food costs and insecurity after Russia’s invasion of Ukraine and adverse weather in key exporting countries drove cereal prices to all-time highs.

Benchmark wheat Wv1 futures jumped 40% this year to a record high in March before retreating recently, though physical prices remain high.

Wheat shipments from the Black Sea region are quoted at around $400-$410 a tonne, including cost and freight for delivery to the Middle East and Asia. Prices are down from a peak of about $500 a tonne reached a few months ago, but remain well above last year’s average of about $300.