Normally, higher prices are good for producers. In the case of wheat, uncertainty over access to Europe’s breadbasket is just creating a cloudy future.
Russia’s invasion of Ukraine is the single biggest reason that the price of wheat has increased since late February, said Theresa Sisung, an industry relations specialist with the Michigan Farm Bureau. Before the war started, winter wheat — the kind most grown in Michigan — was selling for $8.50 a bushel. This week, it’d increased to $12.
May’s edition of World Agriculture Supply and Demand Estimates, a publication of the United States Department of Agriculture, estimates that the average per-bushel price for the 2022-23 year will be $10.23, the highest in history and topping the previous record of $8.02 set in 2008, according to the Michigan Farm News, itself a Michigan Farm Bureau publication.
Much of that will get eaten up in higher costs, Sisung said. The same uncertainty that has produced higher wheat prices has also hit energy costs, leading to higher fertilizer costs and — as everyone knows — higher gasoline prices.
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Currently, mills are working to capacity, she said, although the higher prices have slowed demand a bit. Manufacturers who use wheat for end-consumer products like pastries, bread and biscuit mix aren’t just beset by higher wheat prices but also challenges in logistics including a shortage of truck drivers to move product.
Demand for milled wheat could pick up after the July harvest starts, she said. Prices are expected to drop off a bit when more wheat becomes available.
Michigan is expected to see a smaller than average wheat harvest this year due to a rainy fall that kept farmers from harvesting soybeans — a commodity commonly followed by wheat — and from planting winter wheat, she said.
“Due to our weather patterns last fall, we didn’t get the wheat acres in that we would have liked to have gotten,” said Mike Fassezke, flour milling president for Star of the West Milling Co., in the Michigan Farm News story. “So, we’re looking at smaller acreage numbers in the U.S. There’s just a lot of hiccups currently. It’s almost like the perfect storm — weather, economic turmoil, war. You throw it all together, and it’s all coming to a head.”
This year’s expected wheat harvest is expected at right around 33.3 million bushels of wheat, down from 45 million the year before.
On average, the United States produces twice as much wheat as it needs, with the rest exported, said Fassezke, whose company completed the purchase of Rosebush-headquartered Brown Milling Co. earlier this year.
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Those exports will hit a global market that will see reduced supply for several reasons, three of which are directly related to Russia’s invasion of Ukraine.
The first is a Russian naval blockade of Ukraine’s ports, preventing the country from moving its exports to market. The second is uncertainty of how much wheat Ukraine will be able to harvest, especially from the eastern Donbas region, where heavy fighting is currently taking place.
The third is uncertainty over how much impact the war will have on Russian wheat production, Sisung said.
Wheat prices suffered a recent shock when India announced a partial ban on wheat exports due to weather. The initial shock has subsided, however, on the news that India didn’t institute a total ban on exports and that India comprises just a small portion of global wheat trading, she said.
While there are general fears about a possible global food shortage, it’s expected that would impact places — like North Africa — that grow very little wheat but where demand for it is high.
Supply isn’t expected to be an issue in the United States, Sisung said, but prices of food products in which wheat is an ingredient are likely to increase in price.