Wheat price forecast: Favourable supply, demand dynamics

on Mar 21, 2023
  • Wheat prices have fallen by ~50% from the highest point in 2022.
  • There are serious supply challenges because of climate change and conflict.
  • Wheat demand remains at an elevated level as the population growth intensifies.

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Wheat price has been in a strong downward trend in the past few months even as the Russia and Ukraine war rages on. The soft commodity was trading at $689, which was about 50% below the highest point in 2022.

Demand to outstrip supply

Wheat price has been one of the worst-performing soft commodities in the market even as demand continues to outstrip supply. This decline has intensified after Russia and Ukraine agreed to continue wheat shipments from Ukraine. 

Still, there are reasons to believe that wheat prices will rebound and remain at an elevated level for a while. First, demand remains robust around the world. For one, the world’s population is still growing even as China and Japan falls. The population stands at over 8 billion people, up from 7 billion a few years ago.

Wheat products are among the most popular products in the world today. Think of products like cakes, breakfast cereals, and pizza among others. 

On the other hand, there are serious concerns about supply as the climate continues changing and rivers in many countries dry. China, the biggest wheat-producing country in the world, went through a severe drought in 2022.  The same is true with India, which has a 12.5% market share in the wheat industry.

Other countries that went through drought include the United States, France, and Germany. Unfortunately, the situation will not get better soon. Turkey, a key wheat producer, recently went through earthquakes, which I wrote about here. The recent WASDE report said:

“The 2022/23 global outlook this month is for slightly smaller supplies, increased trade and consumption, and lower ending stocks. Supplies are lowered slightly as an increase in production nearly offsets a decrease in beginning stocks.”

The only challenge for wheat prices is that production in key countries like Kazakhstan, Brazil, and Australia are expected to rise this year. But these governments could ration the amount of wheat that is sold abroad.

Wheat price forecast

wheat price

Wheat chart by TradingView

The daily chart shows that wheat prices have been in a steep downward trend since April last year. For the most of this period, wheat remains below all moving averages. Most recently, wheat has moved below the key support point at $701, the lowest point on January 24. It has also retested that resistance point.

Therefore, in the near term, I suspect that wheat will remain under pressure as investors watch the recently signed export deal between Russia and Ukraine. In the long-term, wheat prices will likely bounce back as demand rises.


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