Problems

Some of the problems that may arise when producing wheat are environmental. The most common ones being unsustainable use of water caused by overuse of scarce water resources and unsustainable use of cultivated land that due to soil depletion. Most countries strive to grow their own wheat, obviously at the highest possible yield. At times this means that wheat is grown in unsuitable environments, which have insufficient water for irrigation. Along with that, strong pesticides and fertilizers are used – these can lead to soil degradation. Problems deriving from high government subsidies also affect the sector. Government subsidies handed out to farmers in the US and Europe have been known to distort world wheat markets. Because of such government support, it is more attractive for farmers to produce wheat, and less so to switch to another crop. This means more is produced than would be the case without said subsidies. With U.S. being a major wheat producer and the world’s leading wheat exporter, its supply to the world market can influence world wheat prices. The excess wheat is dumped onto the world market, which then may lead to local farmers having difficulties in selling their produce. Another issue that has an effect on the sector is abuse of dominant position. There are many producers of wheat at the beginning of the wheat chain, and many bakers and retailers at the end, but only a few large companies in the middle. These companies are able to dictate the prices to both the farmers and the consumers – leading to a supply chain bottleneck.