Milling & Baking News - December 8, 2015 - 7

Editorial

Different roads for wheat and rice

n a world where computer-driven options trad- prices have been mostly on a downward course.
ing often is cited as explaining the overwhelm- This is particularly surprising because these three
ing volume of trade in grains and others fu- years of crops being smaller than use followed six
tures, it may be simplistic to review other factors. years of rice outturns exceeding demand.
Yet, gaining basic understanding of the drivers of
This incongruity largely is explained by the
price moves in markets like wheat, rice and coarse weight of unprecedented stocks in a country like
grains requires a basic look at determinants that Thailand, a leader in export trade. Acknowledging
measure price effects like the relation of produc- pressure from unwieldy stocks does not replace
tion to demand. It's almost a given that when the the weight that also is coming from mounting evisize of a global crop falls short of matching demand dence that rice is experiencing competition from
that prices will be relatively strong. Of course the wheat foods. Yes, food use of both grains is rising
opposite also is the case, that when crops exceed with the area's population, but wheat is cutting
demand prices will face downward pressure. It is into rice usage in places like China and Indonesia.
in crop years when this matrix proves wrong that
Nowhere is this rising consumption of wheat
the opportunity arises for not only understanding foods, mainly bread, of greater significance than
the cause for deviations but for
in Indonesia. Here is a nation
capturing the nuances in global Easy-to-eat foods, in contrast where wheat noodles had vied
and national markets.
to rice and noodles requiring with rice for favor in the diet,
At this time nearly half-way
only to experience more recentboiling water for cooking,
through the 2015-16 season,
ly what has been described as a
stand out as forces.
fascinating examples of price
"voracious" appetite for bread to
movers have emerged. Global wheat prices mostly make sandwiches. The boost in demand reflects its
have felt the weight of a global crop of 732 mil- need to rely solely on wheat imports to supply its
lion tonnes exceeding the expected demand total fast expanding flour milling industry. The result
of 716 million. That weakness has ruled so far this has carried Indonesia to rank as the second largest
season, especially before the outlook for next year wheat importer, with takings this year approachdominates, also is explained by this being the third ing 8 million tonnes, up 25% from four years earsuccessive season in which production exceeds lier. Only Egypt will import more.
demand. This period follows three earlier years in
Looking back a decade, Indonesia imports 60%
which the opposite was the case, with shortfalls more wheat and consumes 9% more rice. No othin wheat outturns leading to a notable period of er country of anywhere near the same size regisstrength. These six years are classic examples of tered similar growth in wheat demand, a pattern,
the global supply-demand effect on overall trends though, that is beginning to appear in other Asian
in prices of wheat.
nations. Cited in studies meant to account for InAlso at hand in 2015-16 is a deviation from this donesia's growth as a wheat market are the rapid
pattern in the global rice market. This is the third economic expansion, tripling in the past decade,
successive year in which rice consumption has and its impact on a larger middle class looking for
exceeded the global crop, with use currently esti- dietary improvements. Easy-to-eat foods, in conmated at 487 million tonnes and the crop totaling trast to rice and noodles requiring boiling water
475 million on a milled basis. Such a drawdown in for cooking, stand out as forces. Seeing these eatstocks in the third successive season of the outturn ing shifts spread to neighboring nations hints of
falling short of consumption should lend strength a demand revolution overwhelming the surprises
to global prices. But this is not the case as rice already under way. MBN
MORTON SOSLAND, EDITOR-IN-CHIEF
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