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Have wheat prices peaked?

E-Corn-Omics: Spring weather creates potential summer profit opportunities for U.S. wheat growers.

Jacqueline Holland, Grain market analyst

June 7, 2024

3 Min Read
Wheat field with market chart
Getty Images/Galeanu Mihai

Winter wheat harvest is kicking off across the U.S. Heartland and will ramping up across the entire Northern Hemisphere over the next month. Over the past several years, high wheat prices have given U.S wheat producers peace of mind at harvest, even though yields may have been lacking. But will that be the case this summer?

Between February and late April of this year, it appeared that wheat prices were on track to fall back to pre-pandemic levels. Winter wheat crops in top global exporter Russia were in idyllic condition and Australia harvested a better-than-expected crop, given that it was an El Niño year, which typically results in drought for the Land Down Under.

July 2024 Chicago Board of Trade SRW futures

And while Australia’s crop kept global supplies comfortable, dry weather in Russia beginning in late April and early May freezes suddenly revived global supply worries for the international wheat market. Kansas City futures prices that had been stuck at or near three-year lows suddenly jumped back above the $6/bushel benchmark and for a short time, above $7/bushel.

That was fantastic news for farmers who were sitting on extra 2023 bushels. Farmer responses from the Farm Futures March 2024 survey suggested that U.S. wheat growers were likely sitting on some extra bushels this spring – producers reported having sold or used 68% of old crop supplies, down 4% from the same period a year prior.

A 5% uptick in off-farm storage accounted for the fewer volume of bushels sold by farmers. A bigger 2023 soft red winter wheat crop in the East likely contributed to the slower volume of old crop wheat sales.

July 2024 Kansas City HRW wheat futures

Those farmers who waited enjoyed the benefits of the May rally in the wheat market. But will the high prices continue past the harvest season?

Pricing new crop

The answer to that will depend on how harvest activity shakes out across the Northern Hemisphere. At press time in early June, the markets had already priced in a 367 million – 441 million-bushel (10-12MMT) cut to Russia’s 2024 wheat crop.

At that time, USDA’s production estimate for 2024/24 Russian wheat production stood at 3.233 billion bushels (88 MMT). Market analysts expected that figure could drop below the 3-billion-bushel benchmark, especially as drought persisted in Ukraine and Western Russia while spring wheat crops in Siberia were bogged down by rain.

So could that prop up U.S. wheat usage prospects following this summer’s harvest? Potentially. USDA is already forecasting smaller crops for the European Union and Ukraine – the world’s second and sixth largest wheat exporters. Trimming too much more from Russia’s wheat harvest could constrain the global balance sheet, especially if persistent dryness lingers over the world’s third largest wheat exporter Canada.

Percent of U.S. wheat crops priced through March 1

Through early this spring, farmers had not changed their 2024 marketing plans significantly from the prior year. The Farm Futures study found that farmers had only priced an average of 46% of new wheat crops as of March 1, the same amount as the year before. That suggests that farmers weren’t eager to take any extra price risks with their crops before the weather issues in the Northern Hemisphere eroded.

But don’t turn down harvest prices that are profitable for your operation this summer. It’s a La Niña year, which means Australia will likely harvest a competitive crop late in 2024 and early 2025. U.S. producers might see some residual demand from short-changed Black Sea buyers in the coming months, but a bird in hand is always better than two in the bush.

About the Author(s)

Jacqueline Holland

Grain market analyst, Farm Futures

Holland grew up on a dairy farm in northern Illinois. She obtained a B.S. in Finance and Agribusiness from Illinois State University where she was the president of the ISU chapter of the National Agri-Marketing Association. Holland earned an M.S. in Agricultural Economics from Purdue University where her research focused on large farm decision-making and precision crop technology. Before joining Farm Progress, Holland worked in the food manufacturing industry as a financial and operational analyst at Pilgrim's and Leprino Foods. She brings strong knowledge of large agribusiness management to weekly, monthly and daily market reports. In her free time, Holland enjoys competing in triathlons as well as hiking and cooking with her husband, Chris. She resides in the Fort Collins, CO area.

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