Climate Change Fuels Soaring Wheat Prices as Global Droughts Intensify

Global wheat prices are expected to soar due to climate change, which is exacerbating droughts in major wheat-growing regions. A new study found that compound droughts, where several key growing regions experience severe water scarcity at the same time, explain a striking 74% of year-to-year swings in global wheat prices between 2000 and 2021.

The researchers used a new indicator called Severe Water Scarcity (SWS) to measure the share of global cropland experiencing drought during the critical growing period. They found that wheat is disproportionately grown in cooler, drier regions where water demand already outpaces rainfall, leaving it with little buffer against drought.

The study projected that severe water scarcity will spread across an even larger share of the world's wheat belt as global temperatures continue to rise. The model estimates an average global wheat price around $193 per ton for the 2001-2020 period, but this is expected to climb to roughly $294 per ton under a lower-emissions pathway by 2031-2050.

The researchers caution that drought is just one piece of a bigger puzzle shaping wheat prices, and that other factors such as energy costs, fertilizer prices, grain stockpiles, trade policy, and geopolitical conflict also play a significant role.