US wheat futures have climbed to their highest level in eighteen months, driven by the combination of a drought affecting key growing regions in the southern Great Plains and a cost structure that has made production more expensive across the board.
For India, which is one of the world’s largest wheat producers and consumers, the development has implications both as a potential export opportunity and as a signal about global food security conditions.
What’s Happening in the US
Winter wheat in Kansas, Oklahoma, and Texas — the states that typically produce the bulk of US hard red winter wheat used for bread flour — has been under severe stress from a multi-year drought pattern in the southern Plains. The USDA’s crop condition ratings for the current season have been among the worst in recent memory for those states.
Spring wheat in the northern Plains has been somewhat better, but elevated input costs — fertiliser, diesel, and the cost of running irrigation where it exists — have compressed farmer margins and in some cases led to reduced planted acreage as the economics of production became less favourable.
The India Connection
India banned most wheat exports in May 2022 after domestic prices began rising following the combination of poor harvest conditions and the Ukraine war’s disruption to global supply. That export ban has been selectively relaxed for government-to-government deals and specific bilateral agreements.
The current global price environment creates pressure to revisit the export ban more broadly — the price premium available on international markets is substantial. Against that: domestic food security, the political cost of rising roti prices, and the buffer stock management calculus of the Food Corporation of India.
The Bigger Pattern
The convergence of climate stress on agricultural production with the disruption of traditional supply chains from the Ukraine conflict has made global food markets more volatile than they were a decade ago. The wheat price spike is one data point in a pattern that agricultural economists have been warning about for several years.
Countries that built domestic food security buffers during the last crisis period are better placed to absorb that volatility. Countries that didn’t are more exposed.
