The wheat harvest in the U.S. has rebounded from two years of lesser harvests.
CoBank says in a report on the grain elevator business that they can look for a larger handle this year but they face the risk that global wheat prices may go up.
“Wheat stocks among major exporters are historically tight, and any disruption to the flow of Russian exports through the Black Sea could trigger a sharp price run-up,” CoBank said.
“The flood of cheap Russian wheat into the global market may have created a false sense of security in the world wheat market,” said Tanner Ehmke, grains and oilseeds economist for CoBank.
“The greatest margin risk to storing wheat is the shrinking world wheat crop outside of Russia and China, which leaves the market vulnerable to supply shocks and extreme volatility in wheat prices.”
The cost of storing grains, including wheat, remains historically high due to the sharp rise in interest rates.
That will pinch profits, particularly for the hard wheats, it said.
They can hope to offset that with higher prices for the grain they own.
The rebound in the U.S. wheat harvest was largely due to big increases in soft red winter wheat yields in the Midwest, where farmers produced the biggest crop in nine years. This year’s soft red winter wheat harvest rose 31 per cent from last year, said the United States Department of Agriculture.
In the Central and Southern Plains, production of hard red winter wheat lost significant yield under ongoing drought. Overall production rose 10 per cent from last year, according to USDA, mainly because more acres were harvested.
The hard red spring harvest in the Northern Plains is expected to be down seven per cent from last year despite expanded acreage. Late planting followed by persistent drought limited yields.
A decline in Canadian hard red spring wheat production is expected to hold prices at a significant premium in the year ahead.
Plenty of cheap Russian wheat combined with a strong U.S. dollar continue to be major headwinds for U.S. wheat exports, CoBank said.
Russia’s currency is down by 30 per cent from last year and is putting Russian exports on sale and pushing down world wheat prices. Russia is currently harvesting a near-record wheat crop with substantial carryover inventories from last year’s record-sized harvest.
In China, wet weather during harvest damaged a substantial portion of the Chinese wheat crop, which likely result in China increasing wheat imports.
Excluding Russia and China, the world’s wheat stocks-to-use ratio is nearly the tightest on record.
Drought has substantially reduced wheat supply in Argentina, Canada and Australia.
Ukraine’s wheat harvest faces numerous delivery obstacles due to the ongoing Russia-Ukraine war.
North Africa will need more wheat imports this year and India’s ban on rice exports means greater demand for wheat.
