To say that COVID-19 has not impacted crop prices would be a misstatement. To state how much impact could be misleading. At any given point in time, many market factors are influencing prices and currently, there is a lot going on in the markets.
The10-year average monthly Oklahoma wheat price is $5.53. The lowest monthly average price was $2.90 (Oct 2016) and the highest monthly average price was $8.63 (Sept 2011). The current Oklahoma wheat price is $4.32, which is $1.21 below the 10-year average price.
COVID-19’s price impact may depend on location and place in the marketing system. Hoarding of bread and flour may have caused wheat importers to increase wheat purchases. Also, reports have indicated that some exporters reduced exports to ensure the wheat for milling in their respective countries. Both of these actions probably resulted in higher prices.
After COVID-19 was declared a pandemic (January 30), wheat prices were steady to 20 cents higher ($4.40 to $4.60) before declining 40 cents from the January 30 price and 60 cents from the February 18 peak price (Figure 1). Wheat prices recovered 40 cents of the loss before the first lockdowns were announced (March 21). After the lockdown announcement, wheat prices gained another 32 cents to $4.78. Wheat prices remained in the $4.40 to $4.70 range until the May WASDE (World Agricultural Supply and Demand Estimates) provided the 2020/21 marketing year supply, demand, and price projections.
Wheat prices broke the $4.40 cash price support (May 12) because 2020/21 world wheat marketing year wheat production was projected to be a record 28.2 billion bushels. World 2020/21 wheat ending stocks were projected to increase from the 2019/20 marketing record of 10.8 billion bushels to 11.4 billion bushels.
The May WASDE projected 2020/21 U.S. wheat ending stocks to decline from 2019/20’s 978 million bushels to 909 million bushels. Hard red winter wheat production was projected to be 742 million bushels compared to 842 million bushels in 2019. This 100-million-bushel reduction in production is more than offset by the Black Sea exporters’ 157 million bushel increase in production. Australia’s wheat production is projected to be 324 million bushels higher than last year.
Cotton and corn prices have been negatively impacted by a drastic decline in oil and ethanol prices caused by a reduction in gasoline demand (COVID-19) and a price war between Saudi Arabia and Russia. Also, market reports were projecting U.S. 2020 corn production to increase to nearly 16 billion bushels and ending stocks to increase to 3.0 billion bushels.
Around the world COVID-19 has disrupted transportation and handling. Products have been delayed from the interior suppliers to the ocean ports. Disruptions have also occurred at the docks when loading the crops onto the ships.
The world market situation could be described as “controlled chaos.” Consumers from individuals to government entities have hoarded food and food products. Importers have stepped up purchases, and exporters have tended to reduce exports. These actions have occurred mostly with wheat and rice.
The good news is that when COVID-19 became a market problem, about 85% of Oklahoma and Texas grain crops had been sold and the summer crops were in the planning stages.
COVID-19 has disrupted markets and lives, added uncertainty to the market, and made production and market decisions more difficult. Wheat prices have probably been slightly higher. Corn and cotton prices have probably been lower.
COVID-19’s impact on Oklahoma and Texas crop producers is yet to be determined.