While the consequences of the global contractions that started with the Covid-19 pandemic continue, the war between the two grain giants, Russia and Ukraine, increased geopolitical risks for the food and milling industry. Rising wheat prices and varying market availability have hit the milling industry hard. 

The shrinking value of the currencies of most developing economies is driving up food prices in ways that could deepen the food crises that many of them already face. The outlook for commodity prices for the next year is subject to many risks. “First, disruptions in exports from Ukraine or Russia, both key grain exporters, could once again interrupt global supplies, as they did in the early stages of the war in Ukraine. Second, further increases in energy prices or disruptions in energy supplies (especially natural gas and coal, which are key inputs to fertilizers) could exert upward pressure on grain prices. Third, adverse weather patterns can reduce yields; indeed, 2023 is likely to be the third La Niña year in a row, potentially reducing yields of key crops in South America and Southern Africa,”  World Bank warns in its latest Commodity Markets Outlook report. 

Global wheat flour trade in 2022/23 is forecast to contract by around 2% year-over-year (y/y), to 13.9 million tonnes, some 1.3 MT below the prior five-year average, according to a new report released by International Grains Council (IGC) on 17th November 2022. “Iraq is expected to remain by far the world’s largest flour importer, with arrivals forecast to increase to 2.6 million tonnes, in part linked to tighter envisaged wheat availabilities. Turkey is forecast to maintain its position as the leading exporter of wheat flour in the season ahead, with dispatches pegged at 4.6 million tonnes, amid continued demand from Iraq and potentially reduced market presence of the EU,” says Alexander Karavaytsev, a senior economist at the IGC.