GENEVA , SWITZERLAND – Grains production is rising but it’s being outpaced by consumption in a world in which a range of factors, including weather, war, and animal diseases affecting production, create ever present risks, experts told delegates in November at the Global Grains Conference in Geneva, Switzerland. For flour millers, the long-term challenge is handling increasing consumer demand for a consistent high-quality product.

Alexander Karavaytsev, senior economist of the International Grains Council (IGC), discussed the grain market outlook by highlighting the weather phenomena La Niña and El Niño.

“We are shifting from La Niña to El Niño,” he said. “It doesn’t necessarily mean that production will be lower or higher in some parts of the world, but it may mean dryer or wetter conditions.”  

He explained that El Niño normally is associated with wetter conditions, particularly in South America, and with dry conditions in Australia and South Africa.

Forecasting total world grains production at 2.292 billion tonnes, he said it shows how significant the increase in grains output has been during the past several years.

“This year’s production would be much, much higher than the five-year average or the 10-year average or 20-year average, particularly for maize, and to a lesser extent for wheat,” Karavaytsev said. “But there is an opposite situation for barley, for example, as we are going to see a small reduction.”

However, consumption also has been increasing constantly over the past six years, so there hasn’t been enough production in the world to keep pace, he said.

“This year we are expecting a further increase in consumption, and although we think that production will rebound, growth in consumption is expected to outpace that rebound,” Karavaytsev said.

He did warn that “there are still these recessionary fears around the world, high inflationary pressure, a relatively strong dollar.”

Geopolitical tensions and hostilities add to the risks, while in the feed market there are still threats such as avian influenza or African swine fever.

“Generally, we have seen a retreat in prices from the peak that we saw in May 2022 after the outbreak of the Black Sea conflict,” he said. “Now the prices have declined to around a three-year low, which is around the level of the year 2020 at the start of the COVID-19 pandemic.”

Karavaytsev reminded delegates that, historically, prices are still high.

“The Black Sea region is the same region that has been on the one side underpinning prices and on the other side pressuring prices,” he added, pointing to “disruptions to the supplies from Ukraine, in particular, but also risks and threats that supplies from Russia will be also disrupted when we saw some attacks on ports.”

“On the other hand, the markets have seen these bumper and competitively priced supplies coming from Russia, so in terms of the wheat and maize you can see some bullish and bearish factors that have been influencing the market,” he said.

He said a factor that had limited the downtrend was “our concerns about production in the Southern Hemisphere, particularly Australia and Argentina, which have been facing some unfavorable conditions. Even though with El Niño we are expecting conditions in Argentina that should be better for the wheat crop, we have seen some really dry conditions and even some frosts recently that have considerably damaged the crop.”

He made a series of wheat crop predictions, putting Russia at around 89 million tonnes.

“We have seen some decline in winter wheat area, but the weather has been mostly favorable for the crop year,” he explained.

For Kazakhstan, he noted “some brilliant favorable weather and the planting has been really quick, but after that we have seen some dryness early in the season and torrential rains during the harvesting. The sentiment of the market during harvesting was close to panic. Everyone was looking at when the rains would stop and whether they would be able to harvest the remaining fields.”

Harvesting is now underway in Australia and there have been concerns about some dryness during planting, he said.

“Some areas were not planted that were intended, so we anticipate some impact on yield,” Karavaytsev said. “But initial results on the harvest have been better than expected.”

 In China, rains have hampered harvest and could result in quality losses.

“On the wheat, we might see some increases in production,” he said.

Karavaytsev noted that Argentina “had a disastrous crop last year and anticipates some rebound this year to around 16 million tonnes. But again, harvesting is underway now and we’ll see now how that will pan out.”

The IGC economist also pointed to potentially improved yields in Iran, and some increase in sown areas in Iraq that could translate into increased production.

For Ukraine, the IGC is trying to look at both “controlled and uncontrolled (by the government) areas,” he said. “As you may imagine for uncontrolled areas it has been very difficult to get information. What we’re using is satellite data, and now it suggests that planting in those uncontrolled areas has been much higher than we initially assumed.”

Looking at food consumption, the increase mainly is expected to be driven by population gains in Asia and Africa, he said.

“There have been some remarkable increases in sub-Saharan African food consumption, and we anticipate this year this region would increase consumption of wheat for food, partly due to the high rice prices,” Karavaytsev said.

China is expected to feed more wheat because of quality losses and due to prices, which made it competitive to maize early in the season.

Russia expert Swithun Still moderated a panel of milling specialists and started by asking equipment manufacturer Bühler AG’s Markus Pölz, head of sales and commercial services, what changes he’s seen over a long career with the Swiss company.

“Looking at the milling process as such, it has not changed over the last 30 years,” Pölzl said. “Taking the grain and grinding it — it has become much more modern. The capacity installed in the mills is much higher, especially in the Asian region.”

He pointed to greater automation, particularly of plant control since the 1980s, adding that “all this has brought quite a boost to the milling industry.”

Leading Turkish miller, Dr. Eren Günhan Ulusoy, chairman of the board of Ulusoy Un, who has been with the family company for 20 years, said that over those two decades he had seen an increasing focus on the stability of quality parameters.

“Twenty years ago, we did not have W (the baking strength of wheat) on the contracts of Russian wheat,” he said. “The flour products industry changed. They now push the millers for more stable products in terms of more specifications.

“Then we pushed back to the supplier of the wheat, so it’s a chain starting from the client, the demanding client, the demanding flour product industry, demanding flour millers, demanding traders and origins … from farm to fork.”

Malak Al Akiely, founder and managing director, Golden Wheat for Grain Trading, outlined the change in supply patterns, in Jordan.

“For the government tenders that we import we started 15 years before with US, and then the Black Sea origins were introduced,” she said. “We buy specification. We don’t buy origin.”

Mehdi Zerzeri, shareholder and board member of Tunisia’s Les Grands Moulins de Tunis, called Tunisia “a million-tonne country — a million tonnes of imports in wheat, a million tonnes of imports in barley, a million tonnes of imports in corn, and almost a million tonnes in soybeans.”

“The thing is for wheat and for barley and for durum, these are government tenders so, of course, they buy the cheapest,” he said. “Before 2022 and the start of the conflict in Ukraine, we used to buy mainly Ukrainian. Now we have a diversification of sources, so we have seen a little Ukrainian, and some Russian, Bulgarian, and Romanian origins.”

Zerzeri stressed the need for millers to have the ability to work with very different qualities, because the government, when it receives the wheat, “just puts it in silos and sometimes they mix up and you’ve got qualities that are totally a mix of all three or four origins, so you try to make your best to have the acceptable quality in terms of flour.”

“Due to the policy of the government, we produce only two types of flour by law,” he said. “One is highly subsidized, which goes for $20 a tonne, so it’s dirt cheap. The other goes for a lot more, but it’s only limited to pastries and industries that use flour.

“In Tunisia, we’re approximately 20 millers and a big part of us is running at 50% capacity. As there is no competition in price because it’s a fixed price, it’s only a little competition of quality and the rest is your ability to fulfil your quota every month to your bakers.”

Chris Lyddon is World Grain’s European correspondent. He may be contacted at: [email protected].