A summary of the major changes to the U.S. all-wheat balance sheet.
It seems like all areas of life have increasing prices, which have led to many concerns, bringing both negatives and positives to the lives of producers and consumers. Agriculture is another area that has been experiencing those increases.
Wheat prices have been surging in Marion County recently, as they have all over the state and even all over the country. Cooperative Grain and Supply (CGS) in Hillsboro has noticed a marked increase in the per-bushel wheat prices, both for old and new crops.
They recently posted information on their social media quoting a New York Times article from Feb. 24 that stated, “Food prices have already risen globally as a result of pandemic-related shipping disruptions, rising costs for farmers and adverse weather.”
Conflict in Ukraine
Wheat prices are also surging globally. While there are many reasons for this, including pandemic-related ones, it is largely due to the conflict between Russia and Ukraine, which began the last week of February.
According to Forbes.com, Russia and Ukraine account for nearly 30 percent of global wheat exports, combined. The ongoing conflict has raised fears of global shortages and rising food prices.
Not only are Ukraine’s ports closed due to the heavy fighting, but Russian exports are also taking a major hit from trade restrictions and heavy sanctions from the West.
Forbes.com reported that wheat prices skyrocketed the first week in March and the prices hit their highest level in 14 years on March 3. At that time, experts warned that the escalating conflict between major exporters Russia and Ukraine could lead to a rise in food prices, which have already been hit hard by surging inflation, and this seems to be true as prices continue to rise.
The U.S. Department of Agriculture reports that U.S. prices have been particularly underpinned by this development with quotes for Hard Red Winter (HRW) and Soft Red Winter (SRW) commanding the largest price increases as these classes are the most directly in competition with Russian and Ukrainian wheat. Prices are up more than 80 percent from last year.
Marion County has clearly seen this. CGS CEO Jerry Fenske said the price increase has been sudden on all commodity prices.
“The world news has drastically affected grain prices,” he said. “Since the start of the Ukraine/Russia conflict four weeks ago, volatility has been the theme for most commodity markets. That world news has affected prices on grain commodities, especially. It’s been since the Ukraine stuff in general that it’s been going up in a big swing, not just a little here and there.”
And it isn’t clear when the crisis will be over.
“All of the markets have come up, especially since the war in Ukraine. There’s a lot of grain shipped out of that region to the world, which they’re not anticipating. Maybe when the war is over but at least probably not for this year. That’s gonna put a tighter supply on the wheat market and all of the other markets as well,” said CGS Grain Coordinator Dick Tippin.
In addition to the Ukraine crisis causing prices to increase, drought has played a role in the ever-rising wheat costs.
“It’s been kinda dry in our area. We are supposed to get some rain in the next week, which will help with the winter wheat crop that’s growing, but we will continue to need moisture,” said Tippin.
According to USDA analysis and data from U.S. Drought Monitor, 73 percent of U.S. winter wheat areas were in areas of drought as of March 1, up slightly from what was reported last month. Much of this area covers key HRW growing regions of western Kansas, Colorado, Oklahoma and Texas.
As of March 6, 24 percent of winter wheat in Kansas is rated as being in good or excellent conditions, compared with 62 percent as of Nov. 28. For Oklahoma, only 15 percent of the winter wheat is in good or excellent condition, compared with 48 percent on Nov. 28. Conditions in Texas are only rated 7 percent good or excellent, compared with 20 percent on Nov. 28.
The USDA reports that HRW prices have also been impacted by concerns of drought in major producing areas. U.S. Hard Red Spring (HRS), typically the highest priced U.S. wheat, is currently priced lower than both HRW and SRW.
Spring weather conditions will have a larger effect on the 2022 wheat crop, and winter conditions alone are not a reliable determinant of harvest potential, so it remains to be seen what will happen.
There are many different opinions on what the rising wheat prices mean for the world and particularly for Marion County.
While higher wheat prices might be good news for U.S. Farmers, as it could bring back more domestic demand, that’s not necessarily true for consumers, as USDA experts warn that pricing pressures could be felt across the world.
The ongoing conflict could drive up U.S. food prices, which were high to begin with, thanks to surging inflation. The recent spike in wheat prices is likely to make the commodity more expensive for food producers, who, in turn, could pass some of those costs on to consumers.
The USDA explains that this could raise the prices of U.S. consumer items like cereal and bread, for instance, though the impact may not be felt right away, since consumer prices usually lag commodity prices, which are contracted in advance.
“Food prices will reflect the rise and the cost of the commodities. Overall, for production and agriculture, it could be profitable for farmers. But expenses are going up, so input costs are higher and have even doubled, so farmers need more for their commodity when they go to sell it,” said Tippin.
“For farmers, raising prices is great,” he said. “Means more money for them, but all their expenses rise, as well.”
Tippin and Fenske explained that higher prices for farmers are good for the farmer who has the commodity to sell, because it is worth substantially more than it was a short time ago. But the backside of that is that all of the other prices that go in to make that grain, such as fertilizer, chemicals, equipment and everything else they need to produce the commodity, is also substantially increasing in cost.
Some of those other costs have also been impacted by the war.
“Fertilizer sales have also been interrupted by the crisis in Ukraine, since much of the supply also comes from there,” said Tippin.