Falling grain prices may help avoid crises, but not likely to reach stores

Grain harvesting in Oisu, Järva County. Summer 2022.
Grain harvesting in Oisu, Järva County. Summer 2022. Source: Olev Kenk/ERR

Grain prices have fallen this summer, and with them, the risk of global food crises compared with this spring. The prices of many other commodities have fallen as well, but these decreases nonetheless aren't likely to reach store shelves in Estonia.

In mid-May, the price of grains stood at approximately €400 per ton; since then, it has decreased by one fifth. Marge Pähkel, product manager for grains at Scandagra Eesti, explained that one aspect behind the decrease in price is funds that over the summer sold off investments they had made this spring. Demand likewise fell due to high prices.

"For buyer countries, who import, the price was very high for them, and they couldn't afford to buy wheat at such high prices," Pähkel said. "That's where pressure on prices came from too. It can be said that at some point the price ceiling had already been reached for buyers."

She added that Europe is seeing a good harvest this year, which will also bring down the price of wheat. Russia is expecting a record harvest this year as well.

"That is where the missing around 10-15 million tons of wheat for the world market can be expected to come from," she said.

Ukraine's wheat exports, however, will likely be twice as small as in previous years, Pähkel continued. As a result, this spring saw fears of widespread food crises in the Middle East and Africa. Now it appears as though this fear won't be fully realized — but the risk, to some extent, nonetheless remains.

Should Russia decide to limit its wheat exports, this could lead to a deficit. Other countries' harvests may not prove as successful either. Heatwaves in Europe and the U.S. are threatening corn crops, for example. Despite the decrease, the price of wheat is still €50-70 per ton higher than it was prior to the launch of Russia's full-scale invasion of Ukraine. With the exception of natural gas, other commodities prices have seen similar decreases.

LHV Pank analyst Kristo Aab cited the cost of wood as an example.

"Compared with its peaks, wood prices on the world market have fallen even threefold — some 20 percent in the past month," Aab highlighted. "True, prices are nonetheless 20-25 percent higher than before the pandemic, when wood prices had started to rise."x

Nonetheless, consumers shouldn't expect price decreases in stores anytime soon.

"It's certainly not worth expecting in the months to come," the analyst said. "These processes don't happen quite so quickly, that world market prices would reach our store shelves or even our food producers. I'm more inclined to say that this will encourage them not to increase prices right now, or consider not increasing prices as much as planned this fall."


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Editor: Aili Vahtla

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