April 5, 2022
Because of the Russian/Ukraine war, Black Sea wheat exports have been reduced, and wheat prices have increased $1.50 to $2 per bushel. At this writing, 2022 harvested wheat may be forward contracted for harvest delivery in Medford Oklahoma for $9.70 compared to $7.50 on February 1. The forward contract price peaked at $11.52 on March 7.
India announced the goal of becoming a major wheat exporter. India’s wheat exports have increased from 19 million bushels during the 2019/20 marketing year to a projected 312 million bushels during the 2021/22 wheat marketing year.
Exportable Indian wheat is the result of increased production and reduced spoilage. India’s 2022 wheat production is projected to be a record 4.0 billion bushels compared to a five-year average of 3.651 billion bushels. India’s 2022 wheat harvest will be the fifth consecutive record wheat crop. To reduce massive storage losses, India invested in storage and handling facilities. It also made improvements in the inspection service and export facilities. It’s possible that India could make up 300 million bushels of lost Black Sea wheat exports.
During the five years, 2015 through 2019, Australian wheat production averaged 787 million bushels per year. During this same time period, Australian wheat exports averaged 520 million bushels annually. For the last two years, Australian wheat production has averaged 1.279 billion bushels and exports have averaged 943 million bushels.
Australia’s 2022 wheat production (and it’s a long time until harvest) may be near the record level, allowing Australian exports to partially offset a reduction in Black Sea exports.
Ukraine’s five-year average annual wheat exports have been 674 million bushels, and
Russian exports have averaged 1.344 billion bushels. Most analysts predict that Ukraine’s
2022/23 wheat exports will be greatly reduced while Russia’s exports will be slightly lower.
The war between Ukraine and Russia will support India’s export goals. The war may also provide a market for Australia’s above-average wheat crop, thus partially filling the gap left by reduced wheat exports from the Black Sea region.
When the Russian/Ukraine war is over and the Black Sea is open for wheat exports, India may have established itself as a reliable supplier of wheat. The result would be lower wheat prices than before the Black Sea wheat was removed from the market.
It is uncertain when Ukrainian wheat will be back in the export market. Some reports indicate that Russia is exporting some wheat now and that there may only be a small reduction in Russian exports.
What may keep Oklahoma and Texas wheat prices well above $8 through August 2022 is continued higher world wheat use than world wheat production.
For the last two years, world wheat use (28.8 and 28.9 billion bushels) has been higher than production (28.5 and 28.6 billion bushels). World wheat ending stocks have declined from 10.9 billion bushels for the 2019/20 wheat marketing year to 10.3 billion bushels for the 2021/22 wheat marketing year.
Another factor supporting relatively high wheat prices is that U.S. 2022 wheat production may be below average. Relatively poor hard red winter (HRW) wheat crop conditions, rising input costs, and the 90-day weather projection of above-average temperatures and below-average moisture in the majority of the HRW wheat area may also contribute to higher prices.
The Russian/Ukraine war has resulted in relatively higher wheat prices. How long prices remain at current levels will depend on how long the war lasts and how much India’s and
Australia’s increased wheat exports offset the reduction of Black Sea wheat exports.
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