Drought has reduced wheat stocks in the worlds major exporting countries to their lowest levels in more than a decade, an analysis showed on 2 August, creating more uncertainty for importing countries as the conflict between major suppliers Russia and Ukraine escalates, according to Foreign Affairs.

　　Analyses of U.S. wheat stocks and crop consumption in the seven major exporting countries show that stock levels will fall to a 16-year low in 2023-24. Excluding Russia, the U.S. and the European Union, the rate fell to its lowest level since at least 1960, reflecting tight supplies from key shipping countries such as Australia, Canada and Argentina, the analysis showed.

　　The Kremlins withdrawal from the Black Sea grain outflow deal on 17 July added uncertainty to the global outlook. "There is no global supply cushion to fall back on," said the president of a consulting firm, "and if Russias exports on the Black Sea go south, the wheat market could get very hot very quickly."

　　Supply worries have ignited volatility in wheat prices, including the biggest one-day gain recorded on 19 July since the February 2022 outbreak of the Russia-Ukraine conflict. Wheat importers with limited reserves on hand are vulnerable to price and supply shocks, traders said, adding that for months some buyers in Asia, the Middle East and Africa have been buying only to meet short-term demand in anticipation of a bumper Russian harvest.

　　The senior economist at the International Council on Matters said the Black Sea supply risk now appeared to be levelling out from Ukraine and extending to exports from Russia. He said 60 million tonnes of Russian and Ukrainian exports, a third of global trade, could be under threat.
       
Uncertainty over Russian exports

　　July was considered the hottest month on record globally. Drought in the northern United States and Canada reduced the harvest potential of protein-rich spring wheat and durum wheat, damaging crops.

　　Analysts warned that farms could suffer more damage before harvest. Canadian drought conditions are similar to 2021-22, with yields down about 37 per cent for the year on a year-on-year basis, and crop forecasters believe US spring wheat yields will be down more than 5 per cent from last year, after a drought that also prompted farmers in Kansas to abandon winter wheat farmland, a senior research analyst said.

　　In North Dakota, the farmer said his familys durum wheat yields were down 20-30 per cent from last year, and he was frustrated by forecasts that a bumper Russian crop would make up for losses elsewhere in the world.

　　The U.S. forecasts Russias 2023-24 wheat exports will climb 44% from two years ago to 47.5 million tonnes. Vessels seeking to deliver grain from the Black Sea region have also declined after Russia pulled out of a Black Sea outbound transport deal amid growing uncertainty over whether fighting will hit merchant ships.

　　Multiple problems in the grain market

　　The EU needs a big harvest to make up for last years production cuts and uncertainty over Black Sea wheat supplies, said Rabobanks global sector strategist for grains and oilseeds.

　　Consultancy-Strategic Grains has repeatedly cut its forecast for EU wheat production, with output expected to be less than 1 per cent above 2022-23 in July, and a slump in crop growth in France, the EUs main exporter.

　　Even so, buyers said they still expect a good EU crop and are focusing on a bumper Russian harvest. In Australia, the worlds second-largest wheat exporter, the countrys agriculture ministry said production would plunge 34 per cent below the 10-year average.

　　In another twist, analysts said Indias ban on non-basmati rice further fuelled concerns that global wheat supplies could tighten, as both crops are used as food. India is the worlds largest rice exporter, accounting for more than 40 per cent of global exports.

　　AgResources Basse said:- "If alternatives are not found and people will return to the wheat market, then we are facing a problem almost worse than when the Russian conflict first broke out."