It is highly unlikely that the commodity market will return to normal next year. The current inflation is not temporary, Rabobank expects. This is partly due to the high demand and relatively small stocks. For example, the wheat market is heading for the largest shortage in almost ten years.
Globally, there will be a shortage of 2021 million tonnes in the wheat balance in 2022-11,5. Rabobank predicts this in the report 'Agri Commodity Markets Research Outlook 2022'. The bank assumes a small increase in global wheat production this season. This would amount to an additional 4 million tons. However, this increased supply is overshadowed by strong growth in wheat demand of 19 million tons. It results in the largest deficit on the wheat balance since 2012-2013.
Production not yet optimal
Only in 2022-2023 will there be a small wheat surplus of 5 million tons again - after two years of shortages. This is mainly due to a decline in the demand for feed wheat. Despite high wheat prices, production is expected to increase only slightly. As a result, the wheat price will continue to rise and will not stabilize until the second half of 2022 at the earliest. Despite significant fluctuations last week, the current wheat price is still at a high level.
High cost prices and extreme weather conditions worldwide underlie the Rabobank forecast for wheat production. The consequences of La Niña in particular are seeping into the wheat market. It causes persistent drought in the US, among other things. The harvest for 2022-2023 is estimated at 50 million tons, bringing last year's level back into view.
Russia is still under export quotas. And possible new measures in this area will cause continued uncertainty in the country. Production is expected to increase slightly in 2022-2023 to 79,5 million tons. In Europe, high wheat prices and strong exports are leading to an area expansion. Drought can affect the yield, which is estimated by Rabobank at 150 million tons. That is 4 million tons less than in 2021.
Will the wheat price go through the roof?
Price formation on the wheat market next year depends on various factors. Rabobank outlines two different scenarios for this. In the most extreme case, wheat prices rise to $370 per tonne by mid-2022. This would be the result of drought in the US, export quotas in Russia and Argentina and strong demand from the Middle East. If global stocks turn out to be larger than expected and China generates less demand because it chooses other raw materials for animal feed, this could significantly dampen price formation.