Wheat price relation with Oil

Slide 2:
Introduction
Wheat is an essential food ingredient in human life. There are lots of food are made of this
element. To some extent, it is the major source of energy and starch in many countries.
When the price change of such raw materials, it impacts many other essentials. Often fuel oil or
crude oil price determines these changes in price over the world. There are many reasons behind
it. Wheat product demand and shortage of supply create lots of geopolitical issues in countries.
Recently Russia and Ukraine war has given a lesson to the world. In today’s world commodity
prices is highly dependent on fuel availability and oil prices, because it determines the transport
cost (Oleson, 2014).
In this Presentation, the demand and supply of wheat and elasticity will be described
further. All the major food items’ prices are related to oil prices and availability. Reasons
for changing wheat prices regarding oil are also presented here with relevant diagrams and
graphics.
Slide 3 & 4:
Wheat demand
Demand is known as the consumer’s desire regarding a particular food or service. Wheat has a
worldwide food demand because of its vast essential food variety. This raw ingredient is used to
make lots of other foods. Many countries are taking wheat flour and other supplement food made
of this as their major food to eat. So the commodity has a never-ending demand over the world.
Almost every country in this world has a demand for this important food ingredient.
According to data from Statista worldwide total consumption of wheat is almost 787
million metric tons. From 2018 to 2022 the consumption rate of this commodity increased
by almost 1.2 % every year (Statista, 2022).
According to the fact and statistics of different organizations and demand analysis wheat is the
second largest food grain in the world based on grain acreage and volume of total production.
The global demand for Wheat production is increased by almost 10 million metric tons as
compared to the last year of 2021. The worldwide wheat stock is also estimated approximately
294 million metric tons by 221. It gives an idea about the vast demand for this food product
(Statista, 2022).
The per capita use of wheat globally is almost 67.7 kilograms. Country wise China is the
biggest consumer of Wheat and the following are European Union, the United States and
India (Rastogi, 2022). These countries combined have more than half of the world’s demand for
wheat.
Slide 5:
Wheat Supply
Supply is a term that is used in the disbursement of some products or services to other parties. In
business and economic terms supply simply means the distribution or disbursement of surplus.
According to the updated data of December 2022, Russia holds the record for the largest wheat
supplier in the world. After Russia, there is Canada, the United States, France and Ukraine which
supply the most of world’s demand for wheat. Russia supplies almost 23.92% of the world’s
demand for wheat followed by Canada, which supplies 12.44% of the world demand (Forum,
2022).
But, as with the demand for consumption and production, China is the biggest producer of wheat
in the world. As china has lots of labor and plenty of land to produce this essential food. It has
produced almost 2.4 billion tons of wheat within the last two decades. From 2000 to last 2020
China has covered almost 17% of the world’s production of this essential (Capitalist, 2022).
Still, China produces the world’s largest producer of wheat. As China has more than 1.4 billion
people within the country, it needs lots of its own produced wheat and grain to feed its vast
population. The rest of the surplus they exported.

Slide 6:
The elasticity of Wheat demand and supply
Elasticity explains a small change in price results in an impact on changes in demand. The
supply of wheat is elastic compared to demand. Wheat is a vastly used commodity to produce
bread and other food items. In many countries, their major food is made of wheat. A small
change in this particular product creates a huge impact on the customer’s budget and expenses.
So this particular product is elastic in terms of economic concept (UKessay, 2022).
In case of different reasons, wheat production could be hampered. During that time of less
reduction or failure in supply chain management, the price of wheat can be increased. Overall the
supply of this product will be impacted. In recent times, Russia and Ukraine’s war situation give
a negative message to the supply chain of wheat. Ultimately this treatment increased the wheat
price double and even triple in some countries. This elasticity of wheat becomes a course for
many third-world countries.
As far as the demand is concerned, the demand for this product is always high. But the change in
demand does not impact the price level of this commodity. Such, if the demand falls for this
product in some countries the overall price for wheat will not decrease. As per the definition of
elasticity, a change in demand for this product does not change the price level of wheat. So, the
demand for wheat is inelastic (UKessay, 2022).
Slide 7:
Price hike of Wheat
Wheat is an essential product to consume over the world. The supply of this product is very
much elastic. There are very few countries that produce this ever essential product for the world.
Previously in this paper, it is been explained that little insufficiency of this product creates an
extravagant demand in the world. Russia and Ukraine are the top five exporters of wheat in the
world.
Recently, at the early beginning of this year, Russia and Ukraine engaged in a loge war of
securing land for each. This war situation creates a huge problem for the supply chain of wheat
over the world. Russia declares not to export wheat to European countries, and because of the
war situation, Ukrainian business traders have also been unable to provide or supply this
essential product to the demand of full countries. As consequence, the demand for wheat
products get increased and subsequently the price of the essential good get hiked over time
(Mottaleb et al., 2022).
This price hike situation gradually increased other food items which are made of wheat.
Worldwide prices for biscuits, croissants, bread, and wheat-made product catch up an unbearable
price for many lower-income people. Not just the Russia- Ukraine war, but the non-cooperative
behaviour of the ally party makes this situation more vulnerable to tow the world (Gulati &
Sharma, 2020).
Slide 8:
Reasons for Price hike
There are lots of reasons why the price of Wheat is getting high nowadays. Some of the reasons
can be explained as to why such a hike happens. Some of the important issues are described
below.
Russia-Ukraine war: As mentioned earlier Russia Ukraine war makes the situation for the
wheat market more volatile. These two countries are the top five exporters of Wheat. When these
two are engaged in such a dispute, it is kind of mandatory for the world to face and struggle with
such problems (Nair & Eapen, 2011).
Increase in Oil price: Oil or fuel oil such as petrol, octane and diesel are the most essential
commodity to run the transport system, electricity and industries. But, recently the parent
organization OPEC has decided to increase the price of these three petroleum products. Other
than that, Russia also denies exporting its crude oil to the world market. The country forced the
world to purchase crude oil from them by paying the price in the rubble. Which makes the
situation of the oil crisis more vulnerable. In this regard, fuel oil is important to transport. When
this oil price increased, the entire transport system of all countries get a shock and become
expensive. Ultimately this results in a hike in every commodity over the world. Wheat is not out
of that fold. This problem creates a negative situation for the supply chain of Wheat and wheat-
made products (MROnline, 2022).
Dwindling supply: Abovementioned points create a significant dwindle in wheat supply. The
supply of wheat decreased because of some natural and man-made problems such Russia-
Ukraine war. Natural causes will be defined below regarding lowering the productivity of lands.
Inflation: Inflation is a global phenomenon now. The increasing inflation rate over the world
ignited the food crisis. People are getting less by their jobs. It indirectly impacts even the wheat
market across the world.
Less productive lands: Lands are limited. Over time, the productivity of such lands is bound to
become unproductive. Excessive use of chemical fertilizers and other substances makes those
lands more unproductive. To use for human accommodation many lands are even cut down to
make apartments. Eventually, these things are directly impacting wheat production negatively.
Which is increasing the wheat price over the world (MROnline, 2022).
Global food crisis: As the productivity of lands getting lessened day by day, people all over the
world trying to adapt to other food-consuming habits. Compared with other food products wheat
can be produced with a lower amount of expense and take low-quality of care. As a result, many
countries are shifting to food products made of wheat. That also gives a little fuel to increase the
wheat price in the world. Even when wheat by itself is in a tough situation within the supply line,
it is automatically increasing the global food crisis (Nair & Eapen, 2011).

Slide 9:
Oil price relation with wheat Price
As mentioned earlier, Fuel oil is something that determines the other commodity prices. The oil
price has a direct and integrated relationship with the wheat price. Because the change in oil
price impacts the transportation sector. Transportation and logistics determine the commodity
price everywhere. An increase in crude oil prices creates a shaky situation in every industry also.
Industries use engine oil to run machines and produce products. This production process of every
material regarding the production of wheat gets affected by this (Researchgate, 2022).
Oil is vastly used to produce electricity. It is not even important to mention, that how significant
electricity is to produce something nowadays. Increases in the cost of electricity eventually
increase the price of pre-production materials or ingredients, such- fertilizers, extracting water
and so on (Chen et al., 2010).
Slide 10:
Substitute and Complements of Wheat
By definition, we know that substitute is something that is been used in place of another product
or service to satisfy. There are lots of food products that are been used as substitutes for wheat.
As such: References: Flour of rice, potato, tapioca, oat, corn, buckwheat and so on (Investopedia,
2022).
On the other hand, complementary goods are used with the main food together to eat or use.
Complementary goods are used to or consumed with the main food generally to satisfy a
particular desire or want. Some of the complementary food that are been used with wheat
products are Oat, Chickpea, yellow maize, powder of avocado pulp and so on (Webmd, 2022).
Slide 11:

References
Oleson, B.T., 2014. World wheat production, utilization and trade. In Wheat (pp. 1-11). Springer, Boston,
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Mottaleb, K.A., Kruseman, G. and Snapp, S., 2022. Potential impacts of Ukraine-Russia armed conflict
on global wheat food security: A quantitative exploration. Global Food Security, 35, p.100659.
Gulati, A. and Sharma, P.K., 2020. Prices, procurement and production: An analysis of wheat and
rice. Economic and Political Weekly, pp.A36-A47.
Nair, S.R. and Eapen, L.M., 2011. Wheat price inflation in recent times: Causes, lessons and new
perspectives. Economic and Political Weekly, pp.58-65.
Chen, S.T., Kuo, H.I. and Chen, C.C., 2010. Modeling the relationship between the oil price and global
food prices. Applied Energy, 87(8), pp.2517-2525.
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