SINGAPORE: Scarred by high and volatile prices, global wheat buyers are reducing their purchases of future supplies but that raises their exposure to potential price spikes that would end up passed on to consumers already struggling with food inflation.

Buyers in key importers across Asia, the Middle East and Africa are making so-called forward purchases of supplies for only about two to three months of their future demand versus typical buying of up to six months, according to millers, analysts and traders.

Typically, rising grain prices take months to reach consumers because millers hold more supply and can weather the volatility. But with lower stockpiles and fewer forward deliveries locked up, consumers, especially in poorer countries, will feel the impact of a price spike more quickly.

“Wheat millers and end users have become more conservative in their purchases because of market volatility,” said Phin Ziebell, agribusiness economist at National Australia Bank. “Prices in the retail market remain elevated and food inflation is very serious issue.” Benchmark Chicago wheat futures climbed to a record in March after Russia invaded key exporter Ukraine and adverse weather in other producing regions reduced supplies.

Futures have dropped 48% since their peak last year but physical grain prices remain high amid the supply uncertainty in the Black Sea region and concerns about the crop in the United States.

Grain shipments from the Black Sea are continuing under a United Nations-backed deal, but that agreement is up for renegotiation in talks starting this week and there is the threat the Russia-Ukraine war will escalate.

Russian wheat prices are being quoted at about $340 a tonne, including cost and freight (C&F) for delivery to Southeast Asia as compared with US hard red winter wheat priced at around $390 a tonne.

Black sea wheat for Asia typically sold at about $260 a tonne before the war, according to Ole Houe, director of advisory services at agriculture brokerage IKON Commodities in Sydney.