Source: U.S. Wheat Associates

World wheat trade may double or more by mid-century and the resulting pressure from rising demand will likely increase prices and volatility. That is the message U.S. Wheat Associates (USW) shared with stakeholders at industry meetings across four continents since mid-November.

USW Vice President of Overseas Operations Vince Peterson discussed the question, "Wheat Outlook for 2010/11 and Beyond ... Is it More Fragile than We Thought?" at several of those meetings, including the annual meeting of ALIM, the Latin American Assembly of Industrial Millers, in Cartagena, Colombia, a U.S. wheat producer meeting in Washington state and the 32nd session of the International Grains Council (IGC) in Perth, Australia, last week. USW President Alan Tracy also covered the topic at the Mideast and Africa District conference of the International Association of Operative Millers (IAOM), in Cape Town, South Africa. See Wheat Letter - November 18 for more information.

Nearly 700 people attended the IAOM meeting. Collectively, the attendees at these meetings represented about half of the world’s total wheat imports.

"This was an excellent opportunity to stimulate thinking and encourage buyers to develop closer ties with the reliable U.S. wheat industry in order to minimize future supply concerns," Tracy said. "We started with a reminder that in spite of three record global crops and ample stocks, the Russian government's export ban sparked an unprecedented supply and price shock."

A broader view of the world wheat outlook reveals that such vulnerability stems from the fact that demand in regions that cannot grow much wheat is outpacing global production.

"Farmers are planting less wheat because feed grain and oilseed crops like corn and soybeans are more profitable," Tracy said. "Higher yields offset some of this loss so wheat production is basically stable, but stable production will be inadequate to meet future demand."

If consumption continues to grow with population alone, he said, global wheat production must increase 40 percent to 900 million metric tons (MMT) (33 billion bushels) by 2050.

"World wheat trade has been fairly stable," Tracy added, "But a closer look shows trade is actually up by 250 percent since 1982 in less developed countries and the global trend is now moving up."

Because wheat is grown primarily above and below the middle latitudes where population and consumption is growing, USW believes world wheat trade will have to more than double by 2050, to at least 250 MMT (9.2 billion bushels).

This is a key observation for private millers who import wheat, Tracy said.

"Production in wheat exporting countries will have to increase substantially, so wheat prices will have to rise relative to corn and other crops that compete with wheat for acreage. We'll see more competition among buyers, more short supply years and even more price volatility," he said. "Millers will have to put the same effort into managing risk as they put into managing their production processes, and our organization can help.

"The U.S. wheat industry has proven its commitment to supplying a wide range of high-quality wheat classes year-in and year-out," Tracy said. "We back up that trust with trade and technical service as well as training opportunities. That is why developing a positive, long-term relationship with our reliable supply chain is a smart hedge against the challenges ahead."

Click here to see Tracy's complete presentation. Click here to listen to an interview with Vince Peterson aired by the Australian Broadcast Company.