Key facts
- US wheat farmers face uncertainty due to drought, high input costs, and geopolitical disruptions.
- Future prices for bread-type wheat are up 39%, but increased costs for diesel fuel and erratic weather are impacting farmer profitability.
- Droughts in the US and Europe, coupled with a potential 'super' El Niño, are threatening global wheat supplies.
- Russian attacks on Black Sea port facilities have disrupted grain shipments, a key route for one-third of global wheat trade.
- Experts warn that the combination of weather-damaged harvests and geopolitical impacts on exports could lead to higher global food prices.
- Planted acreage for wheat in the US is expected to expand about 10% this winter, but harvested acreage has been at its lowest levels since 1877.
US wheat farmers are grappling with a challenging and uncertain growing season, despite a three-year high in wheat prices. Factors such as persistent drought, record-high diesel fuel costs, and geopolitical disruptions to global trade routes are creating a complex environment for producers like Merrill Nielsen, who farms 2,500 acres in Kansas.
Nielsen expressed uncertainty about whether the higher prices would translate to increased profits, citing the rising cost of fuel needed for his tractor and the loss of his entire spring wheat crop due to erratic weather and drought in the southern Great Plains. He indicated a potential reduction in wheat planting for the upcoming season.
Market strategists like Joao Lampreia from Freedom24 highlighted that droughts in the US and Europe, potentially exacerbated by a 'super' El Niño, are shrinking harvests. Wheat supplies in key exporting nations are reportedly at their second-lowest levels on record, with Australia's plantings down 12% due to dryness and fertilizer costs. However, El Niño could also bring beneficial wetter conditions to the southern Great Plains, as seen in record winter wheat yields in 2015-2016, according to Texas A&M economist Mark Welch.
Geopolitical factors, specifically Russian attacks on Black Sea port facilities, have further disrupted grain shipments. This region accounts for one-third of the global wheat trade. While these attacks have driven up prices, alternative export routes for Black Sea farmers may be slower and more costly, with an estimated 35% to 50% of that wheat potentially finding its way out.
Dan Basse, president of AgResource, warned that the combination of weather-damaged harvests and export disruptions could lead to even higher global food prices. The UN's Food and Agriculture Organization's food price index already rose 2.5% in August over the previous year. Basse anticipates a roughly 10% expansion in US wheat planted acreage this winter as farmers seek to capitalize on higher prices, though he noted that harvested acreage has been at historic lows since 1877 due to the greater profitability of corn and soybeans. Vance Ehmke, a wheat-seed seller, noted increased calls for seeds but cautioned that current dry conditions in the southern Great Plains could prevent germination, leaving farmers with little to harvest.