Climbing market prices for wheat are beginning to earn growers’ attention. Wheat acreage is trending back up after several years of historic lows, and this year’s crop quality also shows promise.
The U.S. Department of Agriculture projects the average price in 2022 for wheat to be $10.75 per bushel, which is more than double the 2020 price of $5.05. The average price last year was $7.70 per bushel.
Two separate, simultaneous elements are driving prices up: the Russian invasion of Ukraine; and a drought in one of the largest wheat-producing regions in the U.S.
Global exports
The ongoing conflict between Russia and Ukraine has had a huge impact on global and U.S. markets. Combined, these countries contributed 30% of the global wheat export market before the invasion. The USDA projects Ukraine will account for only 5% of global exports in 2022, which is half of its normal wheat shipment.
“This war has caused a major shift in the global wheat markets,” said Will Maples, agricultural economist with the Mississippi State University Extension Service. “Ukraine is projected to see nearly a 40% reduction in output. The total amount of this production is dependent on how long the conflict continues.”
According to Maples, with the Black Sea coast blockaded by the Russian military, Ukraine is having to resort to shipping grain through Poland. They do not have an efficient infrastructure for this overland trade route as they did on the Black Sea.
Meanwhile in the U.S., crop quality west of the Mississippi River is compromised by a shortage of rainfall. Including the Southern Plains and major production areas in western Kansas and Oklahoma, 49% of the country’s wheat crop is planted in areas under an extended drought.
Only about 30% of this year’s nationwide winter wheat crop is rated good or excellent by the USDA National Agricultural Statistics Service, which has contributed to higher prices. Because markets are so strong, some growers who were using wheat as a cover crop opted to keep it and double-crop other crops behind the wheat.
Editor’s Take:
It’s complicated. A number of factors are contributing to the increase in wheat prices and wheat acreage. For years, wheat production was on the decline in the U.S. It simply was not competitive with crops such as corn, soybean, cotton or rice. Now it is more competitive and that is being reflected in the acreage reports. This offers crop producers another option for their rotation and would be good for soil health. Keep in mind that wheat growers in your area, unless severely impacted by drought, should be in a great position to purchase or lease a new truck after harvest. Plus, they are also prime prospects for AgPack as they get ready to plant this fall or next spring depending on the geography.
