Last updated on February 1st, 2021 at 10:39 am
Wheat flour saw a spike in demand early this year in the United States, as a Coronavirus baking boom and widespread stay at home orders triggered demand from retail consumers for family flour (used for home baking),and wheat-based prepared and processed food stuffs such as pasta, breads, and wheat-based snack products. America’s number one flour brand – King Arthur Flour – saw flour sales spike 2,000% in March alone, and U.S. wheat flour production during the first three months of calendar year 2020 increased more than 4% according to data from the United States Department of Agriculture.
China is the world’s largest consumer of wheat, followed by the European Union and India.
The world’s three largest wheat consumers are also the world’s leading wheat producers.
Although domestic wheat production satisfies the vast majority of all three countries’ wheat consumption requirements, for China and the European Union, domestic demand is outstripped by supply and hence both countries appear in the ranks of the world’s biggest wheat importers. China accounts for 2.8% of global wheat imports and the European Union accounts for 2.6% as of calendar year 2019/20 according to data from the United States Department of Agriculture.
China’s wheat consumption has been generally flat over the past several years with wheat consumption hovering around 125 million metric tons to 112 million metric tons during calendar years 2012/13 to 2019/20 according to data from the United States Department of Agriculture. 90% of China’s wheat demand is met from domestic production and about 10% is met through imports. China has a 95% self-sufficiency target for key staples rice, wheat and corn consumption and allows a certain amount of imports through a tariff rate quota (TRQ) system. China sets annual corn quotas at 7.2 million ton every year, wheat quotas at 9.64 million tons, and rice at 5.32 million tons.
Looking ahead, there is little room for China to grow domestic wheat production to replace imports. China’s wheat yields are among the highest in the world.
And with China being home to about 19% of the world’s population, but having about 7% of the world’s arable land, China’s arable land availability is tight; China’s arable land per capita stood at 0.086 hectares per capita in 2016, compared with 0.118 hectares per capita in India, 0.223 hectares per capita in the European Union, and 0.471 hectares per capita in the United States, the same year according to data from the World Bank.
This suggests that trade policy reasons aside, China will continue to appear in the ranks of the world’s largest wheat importers in the years ahead.
China-U.S. trade tensions saw China imposing a 25% retaliatory tariff on U.S. wheat which saw China-bound wheat exports dive 84% from 2017 figures. However, as part of the Phase 1 Trade deal negotiated between the two countries early this year, China reportedly may increase wheat imports from the U.S. The relief to U.S. wheat farmers may be short-lived however; with China-U.S. relations on showing limited improvement and becoming increasingly fragile, the trade deal may fall apart.
Egypt is one of the few countries worldwide where wheat consumption has been consistently growing, albeit at a very slow rate. And with domestic production outstripped by domestic consumption, Egypt, the world’s largest wheat importer for several years, has been seeing its share of global wheat imports steadily grow from 5.7% in 2012/13 to 7% in 2019/20.
Although the Egyptian government has made efforts to make the country self-sufficient in wheat, plans have so far yielded little results. While Egypt’s wheat demand has grown from 18.7 million metric tons in 2012/13 to 20.6 million metric tons, representing a CAGR of 1.39%, the country’s production has grown from 8.5% million metric tons in 2012/13 to 8.77 million metric tons in 2019/20 representing a CAGR of 0.45%. The result has been a steady increase import’s share of Egypt’s wheat consumption which grew from 45% in 2012/13 to 64.6% in 2019/20 according to LD Investments analysis of figures from the United States Department of Agriculture.
Wheat production growth in Egypt will likely be driven from area gains rather than yields as Egypt already has the highest wheat yields in the world. Given that imports account for more than 60% of Egypt’s annual wheat consumption, in order to achieve self-sufficiency, Egypt will have to increase wheat acreage nearly two-fold, a highly unlikely possibility in the foreseeable future. And with Egypt’s population growing at 2.28% annually, ranking it 31st among 237 countries according to figures from the Central Intelligence Agency, Egypt appears to be a far way off from achieving wheat self-sufficiency and is therefore likely to continue being a major importer in the near future.
Turkey’s wheat consumption has grown from 17 million metric tons in 2012/13 to 19.9 million metric tons in 2019/20 partly the result of an influx of Syrian refugees who are highly dependent on staples such as bread. With domestic wheat production hovering between 16 million metric tons to 21 million metric tons during the period, Turkey has been nearly self-sufficient in wheat production in the past, but a surge in exports of Turkish-made pasta and flour has driven demand for wheat imports, which in turn has propelled Turkey to emerge as the world’s second-biggest importer of wheat accounting for 5.8% of global wheat imports. Over the past two decades, Turkey’s flour exports have doubled and pasta exports have jumped six-fold helping propel the country to become the world’s largest exporter of flour, semolina and the world’s second-largest exporter of pasta.
Over the past two decades, Russia moved from being a net wheat importer to a net wheat exporter and the country accounted for about 18% of global wheat exports during the calendar year 2019/20, up from just 7.7% in 2012/13.
There is tremendous potential for continued production growth in Russia driven by area gains and yield improvements. At 2.39 metric tons per hectare, Russia’s wheat yields are just about half that of China. And the export market opportunity for Russian wheat is significant. Apart from being one of the biggest wheat suppliers to growth markets Turkey and Egypt, Russia is also well placed to increase its share of Chin’s wheat imports in the long term, following a path similar to Russian soybeans which have seen exports to China grow 51 times between 2013/14 to 2018/19; China is increasingly diversifying its wheat sources away from the United States in the face of growing China-U.S. tensions, and Russia could be a beneficiary of this move which suggests sunny days ahead for Russian wheat farmers and more business for Russian grain traders such as Russia’s state-owned United Grain Company (UGC) who is emerging as a formidable contender in global grain trade, which is currently dominated by international merchants such as Cargill Inc, ADM, Glencore, and Louis Dreyfus.