FACTS
Wheat production worldwide
The world’s largest wheat producers are the USA, India, China and Russia. Depending on the region, wheat is used as animal feed or as a staple food, with animal feed predominating. Wheat accounts for approximately 24% of global grain production and covers 20% of the world’s calorie needs.[1]
Overall, more wheat is produced than is consumed. However, the regional differences in production volumes are very large. While the EU exports the most wheat, Russia exports the second largest amount of wheat.[3] It was 31 million tons in 2019.[4] Russia, as the second largest wheat exporter, is followed in descending order by Ukraine, Canada, the USA, Australia and Turkey.[5] Global geographical disparities are the reason for this worldwide distribution of wheat production. The world’s most productive landscapes can be found in the black soils of Ukraine, in loess in Germany and in the steppes of the USA. Almost half of the world’s stockpiles of wheat belong to the People’s Republic of China.[6]
Who imports the most wheat?
Depending on the year, the largest wheat importing countries include Egypt, Algeria, Indonesia, Turkey, the Philippines, Turkey as well as the USA and Japan.[7] [8th]
The global differences in demand result from increased demand, for example due to population growth and the lack of fertile soil.
Egypt consumes the most wheat per capita in the world. The poorer part of the population in particular uses wheat as a staple food. There is a growing demand for wheat. The reason for this is strong population growth and dwindling natural resources.[9] There is a lot of competition between locally produced food and imported ones. Agriculture is strongly characterized by smallholders, a large part of which is subsistence farming. It cannot meet the demand for wheat.[10] There is also a lack of adequate storage and transport facilities.[11] Due to the import of wheat, the trade balance is permanently negative.[12] 1/4 of the state budget goes to subsidies, and the trend is rising. Investment in the country and exports have plummeted since the revolution. Inflation is rising and so are food prices. In order to avoid a new revolution, the government mainly subsidizes wheat. In the future, however, Egypt wants to open up more arable land and increase wheat production in order to increase the degree of self-sufficiency.[13]
In Algeria the situation is similar to that in Egypt. The population continues to grow and the need increases. A higher degree of self-sufficiency should be achieved through the establishment of regional agricultural centers or grants and loans for investors. There are also temporary import bans on certain products as a measure for a more autonomous economy.[14]
Another major wheat importer is Indonesia. Here, too, the population is growing and unemployment is rising. Although Indonesia has been able to show economic growth in recent years, investors are hampered by a lack of infrastructure, not enough skilled workers, bureaucratic hurdles and corruption. In addition to agricultural commodities such as palm oil, wood, cocoa, coffee, tea, tobacco and natural rubber, Indonesia also exports crude oil, natural gas and coal.[15] Despite fertile soil and good climatic conditions, Indonesia is massively dependent on food imports. The small-scale agriculture is not very productive. There is a lack of know-how and capital. In addition, the cultivation of food competes with the cultivation of palm oil for land. Wheat is not grown locally at all.[16]
While the first three countries above are on the DAC list and can be counted as part of the Global South, the USA and Japan are not. Although the USA itself is one of the largest wheat producers, it imported more than 6 million tons in 2018. One reason for this contradiction may be the historically grown bilateral trade structures. The global trade network has evolved in such a way that products are not imported based on actual need, but to maintain trade relationships between individual countries. Another reason may be the re-export of imported wheat to neighboring countries.
Global connections
Wheat, like corn and soya, is one of the most important globally traded products. This market is dominated by the wholesale companies Archer Daniels Midland, Bunge and Cargill (also known as the ABCD Group): their world market share is 70 percent. Cargill is the number one company, followed by ADM.[17] Large corporations buy the goods from grain trading companies, process them if necessary and export them worldwide. The export quantities depend on the demand of the individual countries.
Wheat prices depend on the exchange. They are the same worldwide and are only based on the respective quality and not on other factors such as origin.[18] The companies in the ABCD Group are listed on the stock exchange and have a major influence on the stock exchange price through their market power and knowledge of the market. This is also the case with wheat: They therefore dominate the global wheat market. Companies benefit from price fluctuations on the global market.[19] Wheat and other foods have become objects of speculation.
Other commodity traders that have gained global importance are the Chinese group Cofco and the Russian grain trader RIF, which has meanwhile pushed all of its competitors out of the market.[20] This shows that the trading power of Russia and China is also increasing in relation to the global wheat trade.
Global Perspective on the Wheat Trade
In many countries that are dependent on wheat imports, there is a desire for a higher degree of self-sufficiency and more value creation in their own country. Negative trade balances burden the state budget.
In addition, higher raw material costs have a greater impact on Global South countries due to the lower degree of processing and lower labor costs there.[21]
There is also the question of who consumes the wheat. Thus in some countries wheat is mainly used by the poorer part of the population, while in other countries it is used as animal feed.
In Indonesia, palm oil cultivation exploits land and people, while important staple foods have to be imported.
Wheat imports are particularly important for North African countries. This region is suffering from the consequences of the climate crisis. Droughts, desertification and low rainfall hamper local agricultural production.
Trade supports international relations. Certain products cannot be grown everywhere in the required quantities in an ecologically and economically sensible way. If there is a higher demand for wheat, for example due to an increasing population, the country itself, limited by geographical conditions, cannot meet this demand. How can this demand be met without undermining the local economy?
Sources
[1] Cf.: https://www.kaack-terminhandel.de/de/matif-weizen.html , last accessed on October 20, 2020.
[2] Cf.: Federal Agency for Agriculture and Food: Report on the market and supply situation
Grain 2018, p. 28.
[3] Cf.: https://www.agricensus.com/export-dashboard/ , last access on 15.10.2020
[4] Cf.: https://www.worldatlas.com/articles/the-top-wheat-exporting-and-importing-countries-in-the-world.html , last accessed on November 6th, 2020.
[5] See: Federal Agency for Agriculture and Food, report on the market and supply situation
Grain 2020, p. 9.
[6] See: AgriCensus | Export Dashboard, https://www.agricensus.com/export-dashboard/ , last accessed on 09/14/2020.
[7] See: https://www.trademap.org/Country_SelProduct_TS.aspx?nvpm=1%7c%7c%7c%7c%7c1001%7c%7c%7c4%7c1%7c1%7c1%7c2%7c1% 7c2%7c2%7c1%7c1 , last accessed 2020-10-20.
[8] Cf.: https://www.giz.de/de/weltweit/319.html , last accessed on November 5th, 2020.
[9] Cf.: https://www.gtai.de/gtai-de/trade/branchen/branchenbericht/aegypten/aegypten-strebt-importsubstitution-bei- Landwirtschaftliche-16964, last accessed on October 15, 2020.
[10] Cf.: https://www.dw.com/de/%C3%A4gypten-%C3%A4rger-um-subventionen-weizen/a-19349848
[11] Cf.: https://www.gtai.de/gtai-de/trade/branchen/branchenbericht/aegypten/aegypten-strebt-importsubstitution-bei- Landwirtschaftliche-16964, last accessed on October 15, 2020.
[12] Cf.: https://www.dw.com/de/%C3%A4gypten-%C3%A4rger-um-subventionieren-weizen/a-19349848
[13] Cf.: https://www.gtai.de/gtai-de/trade/branchen/branchenbericht/algerien/ausbau-der-nahrungsmittelproduktion-geplan-539884 , last accessed on October 16, 2020.
[14] Cf.: http://www.bmz.de/de/laender_regionen/asien/indonesia/index.jsp , last accessed on October 20, 2020.
[15] See: https://www.gtai.de/gtai-de/trade/branchen/branchenbericht/indonesia/markttrends-274436 , last accessed on October 16, 2020.
[16] Cf.: Heinrich Böll Foundation, Corporate Atlas, p.26f.
[17] See: Dr. Willi Kremer Schillings 2016, pp. 101-104.
[18] Cf.: Heinrich Böll Foundation: Corporate Atlas, p.26f.
[19] Cf.: Heinrich Böll Foundation, Corporate Atlas, p.26f.
[20] See: Federal Agency for Agriculture and Food, report on the market and supply situation: grain 2018, p. 30
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