Rabobank: global wheat price could top $500/t in early 2022 if supplies tighten and bad weather persists

Grain growers are set for a boon in prices, according to Rabobank. See how high wheat may fly.

Rabobank believes wheat prices may rise about 20 per cent higher than current levels and trigger unrest in some countries. Picture: Dannika Bonser

Global wheat prices could top A$530 a tonne by the middle of next year, potentially causing consumer unrest in some countries, according to Rabobank’s annual commodity analysis.

Rabobank said the La Nina climate phenomenon could cause drought conditions in northern hemisphere grain producing countries — similar to what occurred in key parts of the US wheat belt.

Coupled with major exporter Russia imposing high export taxes on wheat being shipped out of the country in a bid to shore up domestic supplies, plus high shipping costs and tight fertiliser supplies, wheat might be in short supply again next year, the bank said.

“Like a spiral, the higher commodity prices go up, the more buyers want to stock up to avoid shortages and disruptions ahead and guarantee normal operations,” the bank said in its report.

“For key food staples, like wheat, exporting countries have been increasing export taxes to cool domestic prices, while importers have been trying to front-load their import programs to keep food inflation under check.

“Amid the (Covid-19) pandemic — still peaking in parts of the world — keeping a good supply of agricultural commodities and food staples like wheat in particular, is a critical government goal to avoid further discontent.”

Grain Growers Limited chairman Brett Hosking said it would be “enormous” for Australian farmers if prices of $530 a tonne eventuated.

“I think we’re going to see a big cropping year next season anyhow, based on high grain prices,” Mr Hosking said.

“Those sorts of (grain price) numbers give a bit of security even if the season doesn’t pan out as well as what we hope.”

The Rabobank report noted that high wheat prices in 2007-08 was considered a contributing factor to the Arab Spring revolt which later evolved in the Middle East, causing the overthrow of leaders in a number of countries in the region or sustained popular unrest.

In a base case scenario, the bank forecast prices to rise to about US$8.20 a bushel, or A$430 a tonne in the first quarter of next year.

But in a “high case” scenario, the bank said Russia could impose export quotas next year on top of the export taxes put in place this year, another key exporter in Argentina might impose export taxes and there was no guarantee Australia would have a third consecutive bumper harvest.

“Middle Eastern countries, especially those enjoying high oil export revenues, could also accelerate their wheat buying,” it said.

“In this scenario, we see wheat prices going to US$10 a bushel ($A530 a tonne).”