Because of inflation, world wheat consumption is heading

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Global wheat consumption is headed for its biggest annual decline in decades as soaring inflation forces consumers and companies to use less wheat and replace it with cheaper alternatives, Reuters reports.

It is possible that in the second half of this year, consumers will face even higher prices for wheat, given that importers, who have so far taken possession of cargoes bought several months ago at lower prices, will start to transfer, to the account of consumers, the costs caused by the explosion of wheat prices to record values ​​in May.

Analysts and traders consulted by Reuters say that in the July-December period, global wheat consumption could fall by 5%-8% compared to the same period last year, a much larger contraction than the 1% forecast by the US Department of Agriculture .

“We will witness a decrease in the demand for wheat for fodder in Europe and China. Demand for wheat for human consumption has begun to slow in a number of major importing countries around the world,” says Erin Collier, economist at the United Nations Food and Agriculture Organization (FAO).

Benchmark wheat futures have risen 40% this year, hitting a record high in March, only to ease recently, but physical prices remain high. For example, wheat deliveries from the Black Sea region are quoted at around $400-410 per tonne, including delivery. Even though they are down from a peak of about $500 a ton reached a few months ago, they still remain well above last year’s average of about $300.

Among the countries that could have problems with wheat imports are Yemen, South Sudan, Sudan, Syria, Ethiopia, Afghanistan and Sri Lanka, Erin Collier said.

As rising costs hit household budgets, global protests have begun to emerge, with people taking to the streets in China, Malaysia, Italy, South Africa and Argentina.

In Indonesia, the world’s second-biggest wheat buyer, consumption has already fallen in the first five months of the year and a further decline is expected for the rest of the year as high prices are transmitted along the supply chain.

As consumers cut back on purchases, bakers and noodle makers have begun substituting rice for wheat.

In Vietnam, one of the feed markets with the strongest growth rate, rice replaces wheat. A procurement manager at a milling company in Ho Chi Minh City said government officials have asked him to find alternative sources amid disruption to supply chains.

Thailand has since the beginning of this year increased the quota for corn imports to 600,000 tonnes from 54,700 tonnes, and has also reduced import duties to support the feed market, traders in Bangkok say.

In response to the changing situation in the feed market, the US Department of Agriculture recently revised its estimates for world wheat consumption in the 2022/23 crop year to 784.22 million tons, down 1.77 million tons from by previous estimates and by 6.29 million tons less than the previous agricultural year.