As war disrupts supply chains, U.S. wheat crop is smaller than expected
U.S. growers reaped their second-smallest wheat crop in 20 years due to drought in the Plains, said the Agriculture Department. The smaller-than-expected harvest would delay any American role in restoring grain flows disrupted by the Russian invasion of Ukraine.
Wheat futures prices leaped to their highest level in two months following release of the USDA estimate on Friday of a 1.65 billion-bushel crop, a 7.5% reduction from its previous estimate and only 3.6 million bushels larger than last year.
The downturn “opens more uncertainty about the world’s wheat supply, given the increasing tensions about the Black Sea corridor remaining open,” said agricultural economist Jerry Gidel of Midland Research, based in Chicago. Russian president Vladimir Putin denounced the West as “the enemy” while announcing on Friday that Russia would annex four regions of Ukraine.
“We just don’t know what Russia will do,” said Deputy Agriculture Secretary Jewel Bronaugh last week, when asked if Russia would allow continued grain exports from Ukraine’s Black Sea ports. “So we have to wait and see and be prepared.”
Ukraine exported nearly 4.3 million metric tons of grain during September, up from 3 million metric tons in August, and the largest monthly total since the Russian invasion on Feb. 24, according to its Agriculture Ministry. Shipments were much larger before the war, with 17 million metric tons of wheat alone in 2020-2021.
Ordinarily, Russia and Ukraine are two of the world’s largest suppliers of wheat to the world market. Ukraine also is the No. 1 sunflower oil exporter and a large exporter of corn. Commodity prices rose following the invasion, adding financial pain to wheat-importing nations in Africa and the Middle East confronted with the loss of Black Sea grain. Russia harvested its largest wheat crop ever this year and is forecast to export a record 42 million metric tons of it.
The Biden administration has urged farmers to expand production to buffer the impact of war in Ukraine, particularly by growing more winter wheat, the major U.S. variety. Winter wheat, which is planted in the fall, lies dormant during winter and is harvested the following spring and summer, accounts for as much as three-fourths of U.S. production.
Spring and durum wheat production totaled 546 million bushels this year, 48% larger than last year. However, the increase was counter-balanced by the drought-induced decline in winter wheat output. In August, the USDA pegged spring and durum at a combined 586 million bushels, but scaled back slightly in the Small Grains Summary issued on Friday, its last look at the wheat crop until January.
The 2022 and 2021 wheat crops would be the smallest since the 1.606 billion bushels in 2002. From 2012 to 2021, the wheat crop averaged 1.987 billion bushels annually. Also on Friday, the USDA said in its quarterly Grain Stocks report that the soybean stockpile was larger and the corn stockpile smaller than traders had expected. Soybean futures prices fell 46 cents a bushel, to $13.64 ¾.
In early September, the USDA forecast that this year’s wheat crop would sell for an average $9 a bushel, the highest season-average price ever. It also forecast that soybeans would average a near-record $14.35 a bushel, and that corn would be $6.75, its second-highest season-average price.