General Characteristics

  • Wheat is one of the world's three most important cereal crops along with maize and rice. It is reported to be grown domestically from atleast as early as 9000 BC and is now grown in almost all parts of the world.
  • Wheat is a globally important source of dietary carbohydrate (starch) and protein (gluten). Its grain is a staple food used to make flour for leavened, flat and steamed breads, biscuits, cookies, cakes, breakfast cereal, pasta, noodles etc and for fermentation to make beer, alcohol, vodka, or biofuel. It is also used for feeding animals to a limited extent.
  • Different varieties of wheat are grown across the world. The three principal types of wheat used in modern food production are: Triticum vulgare (soft wheat), Triticum durum (hard wheat) and Triticum compactum


Global Scenario

  • The annual global wheat production has been in the range of 600-630 tonnes in the recent years. However, in 2008-09 it is estimated to have risen sharply to 689 million tonnes. The combined production of all cereals in 2008-09 is estimated to be 2525 million tonnes.
  • EU-27, China, India, USA and Russia are the five major producers of wheat accounting for close to 70% of the total global production, with 2008-09 production in these regions being 151, 112.5, 78.6, 68 and 63.8 million tonnes respectively.
  • Wheat is the most important cereal traded in the world market. The global trade in wheat during 2008-09 was sharply up at around 140 million tonnes in 2008-09 from an average of around 110 - 115 million tonnes in the recent previous years.
  • While US (25 - 35 million tonnes), EU-27 (15-25 million tonnes), Canada (15-20 million tonnes), Australia (8-18 million tonnes) and Argentina (6 - 12 million tonnes) are major exporters, there are a large number of countries importing wheat with maximum demand emanating from developing nations. The major importing regions are Middle-east Asia, South-east Asia and North-west Africa. Egypt, Brazil, Indonesia, Algeria are the most important importing nations.
  • Wheat crops around the world have their own unique production cycles of planting and harvest timeframes.


Important World Wheat Markets

  • Derivatives exchanges - Chicago Mercantile Exchange, which acquired Chicago Board of Trade, Kansas City Board of Trade, Zhenghzhou Commodity Exchange, South African Futures Exchange, MCX, NCDEX
  • US FOB and EU (France) FOB prices determine the physical prices


Indian Scenario

  • India has the largest area in the world under wheat cultivation. However, due to low productivity it is only the third largest producer after EU-27 and China.
  • India's annual production of wheat has been around 75-79 million tonnes from 2006-07, with production in 2008-09 estimated to be around 78.6 million tonnes. Wheat accounts for around 30-35% of India's total foodgrain production of around 220 million tonnes. India's annual wheat consumption is estimated to be around 72 million tonnes currently.
  • Green revolution and increased focus by Government on wheat has helped wheat production to surge sharply from around 6 million tonnes at time of independence to current levels. Close to 90% of the area under wheat is irrigated, which too has supported the rise in output over the years.
  • Uttar Pradesh (34%), Punjab (20%), Haryana (13%), Rajasthan (10%) and Madhya Pradesh (10%) are the main wheat producing states of India.
  • Wheat is cultivated as a rabi crop in India, with sowing being undertaken from October to December and harvesting from March to May. The official marketing season of wheat in India is assumed to commence from April.
  • Government plays a major role in the wheat value chain in India as the cereal is very important for the country's food security. The Central Govt. sets the Minimum Support Price (MSP) every year, which sets the mood for the upcoming season. As govt. agencies have been recently procuring close to 25-30% of annual production, open market prices too do not generally fall below this price. Historically, the procurement has been around 15-20%.
  • The procured wheat is used to maintain a minimum buffer stock for meeting unforeseen exigencies, for providing foodgrains required for Public Distribution System (PDS) and the other foodgrain based welfare programmes of the Government. In addition, the grain is also sold at pre-determined prices to the open market.
  • Though, India is not a major player in global markets India has resorted to imports, whenever there is a supply tightness. India has also exported around 5 million tonnes of wheat in 2003-04. Govt. agencies take the decision to bring in imports and the current policies are not in favour of exports.


Market Influencing Factors

  • Wheat is an annual, seasonal crop and prices usually tend to rise during the cultivation period, i.e. December to March due to scarcity in the market and dip during the peak arrival period (April and May).
  • Weather has a profound influence on production, especially in Haryana and Punjab as temperature plays a crucial role in determining the yield.
  • The Govt. policies with regard to MSP, buffer stocks, PDS sales, Open Market Sales, imports / exports are very important influencing factor with regards to Indian wheat prices.
  • Despite international trade being limited, the several variations in production or consumption at various major or minor producing or consuming country, which influence global prices, are reflected in the domestic long-term price trend. However, in the short-term normally there is no significant relation with international prices.
  • Several international agencies like US Dept. of Agriculture, International Grains Council, Food and Agricultural Organisation release regular, periodic reports on global supply-demand situation, which is widely looked upon by the global players.