How is the price of wheat formed in the market?

For several years the price for a ton of wheat was around 200 euros. Since the start of the war in Ukraine the price has doubled. It is particularly interesting that only 25% of the world wheat crop, ie about 785 million tonnes, is traded in international trade. The remaining quantity is sold, processed and consumed at the place of production.

“World wheat prices are set on special stock exchanges,” Wolfgang Zambel, chief executive of Kaack, an agricultural commodity firm, told DW. “There are two major commodity markets in the world. CBOT in Chicago and Euronext in “Paris. They are considered the barometer of price in the world market and are under public supervision. The price is formed exclusively by supply and demand.”

The price will remain high regardless of the war

For wheat producers and traders, the price set on the stock exchanges looks like a wholesale price, says the German expert, referring to a kind of benchmark accepted by the world market. Russia and Ukraine together produce about a third of the world’s wheat, 60 million out of a total of 200 million tonnes. Wolfgang Zabel explains:

“At the beginning of the war we saw the price per ton of wheat skyrocket to $ 425. This is mainly due to the fact that the availability of a commodity was further reduced. The world market can not function normally without wheat from Ukraine. “and Russia. The quantities are very large.”

The German Farmers’ Association expects wheat prices to remain high, despite the war in Ukraine. Prices had already risen due to the pandemic, but also due to the lack of fertilizers and spare parts for agricultural machinery. Stockbroker Wolfgang Zabel has a similar view and assumes that wheat will remain expensive at least until 2023.

Andreas Becker

Edited by: Stefanos Georgakopoulos

Source: Deutsche Welle