Problem

Instability of wheat trade

Nature:
Wheat is now the staple food of nearly half the world's population, even in those countries where it is not an indigenous crop. In developing countries demand is expanding rapidly, often outpacing domestic production and leading to growing import requirements. These in turn burden the countries' balances of payments, forcing many of them even further into debt. At the same time, the rising volume of imports has overstressed the capacity of their ports, storage facilities and transportation networks, leading to expensive delays and considerable waste. In the poorest countries low production and the inability to make adequate imports often affect consumption levels.

Wheat is mostly exported by developed countries, whose producers face rising costs of inputs and may plant alternative crops if market price relationships are favourable. Producers, though efficient, therefore often need expensive government support if output is to be maintained. Those countries have the facilities to store vast amounts of grain, but find it expensive to do so. To reduce their surpluses, exporting countries may provide export credit or subsidies, leading to deteriorating trade relationships with their competitors. Periods of very low prices tend to be followed by production cutbacks and the risk of shortage if import demand unexpectedly increases. Centrally-planned countries, although themselves major wheat producers, also import on a large scale. But the variability and unpredictability of their demand can destabilize international markets.

Incidence:
World wheat production in the mid-1980s rose to about 500 million tonnes, having doubled in only 20 years. Most of the increase was due to higher yields: the result of improved varieties, increased irrigation, and greater use of pesticides and fertilizers. World consumption has been growing at a comparable rate - about 3.5% a year. Developing countries, whose consumption is growing at over 4% a year, now account for more than half of world wheat imports, which averaged 100 m tonnes in the early 1980s. The CIF cost of their commercial imports of wheat and flour is now over US$ 8 billion a year, compared with under $2 billion in the early 1960s. Recently, the fastest growth in imports has been in Africa and Near East Asia.

The USA is the largest exporting country, with about 45% of world trade. Argentina, Australia, Canada and the European Economic Community together usually account for around 50%. World end-of-season carryover stocks stood at about 120 m tonnes in 1984. Developed countries accounted for about some 75m of the total, of which half was in the USA. Developing countries held less than 20 m tonnes and centrally-planned countries the rest. The last period of short wheat supplies was in the mid-1970s (at the time of the so-called 'world food crisis'): prices of some grades increased threefold in 18 months. Production subsequently rose rapidly and prices fell, although there was a brief return to higher prices in 1980-81, the market subsequently eased again, and by mid-1984 prices stood at levels which in real terms were probably the lowest for 50 years.

Problem Type:
E: Emanations of other problems
Date of last update
01.01.2000 – 00:00 CET