War in Ukraine continues to cause havoc in wheat market

Recent aggression in the war between Ukraine and Russia propelled roller-coaster wheat prices last week.

Mark Welch, Ph.D., Texas A&M AgriLife Extension Service grain economist, Bryan-College Station, said continued conflict and/or escalation is likely to further contribute to volatile global wheat prices and influence U.S. production in 2024.

Russian and Ukrainian farmers in that region produce one-third of the world’s wheat supplies, and the conflict has created a volatile grain market since the war began in late February 2022.

Recent actions by Ukrainian and Russian forces have impacted agricultural and shipping infrastructure. Russia withdrew from a tentative agreement that allowed Ukrainian grain exports to move out of the Black Sea and signaled it would treat ships around Ukrainian ports as military targets.

Welch said some Ukrainian grain shipments have continued to move overland and out of ports, but those exports were down significantly. Meanwhile, Russia is exporting record amounts of wheat.   

This escalation led to wheat price spikes that have levelled off somewhat, Welch said. Wheat prices are still below their peak of $13 per bushel following the Russian invasion of Ukraine, but the recent volatility underscores the ripple effect the conflict continues to have on global markets.  

“There is a lot of uncertainty for global grain in the middle of this war,” he said. “Interruptions of supply created a bump in prices and bumps create opportunities for domestic wheat farmers.”

Wheat prices, production and contracts

Most Texas producers with wheat were likely locked into price contracts before harvest that began in May in South Texas — and many were wrapped up in northern parts of the state like the Panhandle, Welch said. Some Texas producers with non-contracted stored grain may have been in a position to capitalize on the price spike.

Welch said many producers lock in a price during the season, while others contract percentages of their crop before, during and after harvest in the hopes of better prices.

While Texas, Oklahoma and Kansas are winding down harvest, while other major wheat production states are still harvesting. Drought has impacted major wheat production areas, including northern Oklahoma, eastern Colorado, Kansas and Nebraska. 

Texas and U.S. wheat producers should prepare for potential price volatility based on weather and war, Welch said. The El Niño weather pattern should increase optimism for Texas wheat, though drought conditions appear to be expanding in recent weeks.

Additionally, he expects high wheat prices and tight global supplies will incentivize increased wheat acres this fall. A bigger wheat crop would likely trigger lower prices in 2024 compared to 2023, but the destabilizing impact of the war could continue to influence the market.

With the U.S. producing only about 7% of the world’s wheat, Russian exports will have a big influence on price, as they have filled the supply gap for Africa and the Middle East.

Russia continues to leverage its position, but that could change, Welch said.

“The world is going to trade on what Russia does or doesn’t do,” he said. “If the war continues and they cut exports or have a short crop domestically, it could really impact global supplies and prices.”

Planning for price volatility

Welch said the market volatility should signal to Texas wheat producers to plan ahead for a potentially high-cost, high-risk market in 2024. With so many variables that could swing the wheat market one way or the other and high input costs, producers should look for savings and pricing opportunities.

Planning should start with soil tests, he said. Fertilizer residue left in the soil could save input costs. Growers should also not discount the technology available to them. Choosing wheat varieties that give growers the best yield potential in their location can reduce management costs and increase harvest.

Welch said he is hopeful growing conditions will improve this winter and next spring but producers should look for ways to improve their profitability.

“It’s going to be a high-cost, high-risk environment, so producers should be as efficient as possible,” he said. “Given the bad year we are coming out of, it’s a good time to evaluate planning for next year and look for marketing opportunities.”

AgriLife Extension district reporters compiled the following summaries:

CENTRAL

The district experienced hot, dry weather with temperatures over 100 degrees daily. Soil moisture was very short to short. Most counties implemented a burn ban. The condition of pastures and rangeland had significantly deteriorated. Pastures were burnt, and the watering tanks were drying out again. A severe grasshopper infestation was putting pressure on forage. Producers were able to cut a fair amount of hay. Overall, crop conditions were poor to good. The first crop of irrigated corn produced good yields. Corn harvesting continued and yields ranged from 60-185 bushels per acre. Cotton was in poor shape and in full bloom, a moisture-sensitive stage. Pecan growers in Comanche County were expecting to lose access to lake and river water by mid-August. Without significant rainfall soon, the remainder of the growing season could lead to expensive losses for farmers. Livestock in some areas were showing signs of heat stress, and producers were providing livestock supplements. Rangeland and pasture conditions were very poor to fair.

ROLLING PLAINS

The heat and lack of rain across the district was starting to take its toll. Native grasses looked okay, but other grasses and summer forage crops were beginning to show signs of stress. Areas that did not receive much or any of the sporadic rains from a couple weeks ago were reporting lower water levels in livestock watering tanks. Most cattle were still in good condition, but producers were expected to begin feeding hay and culling if conditions continued to decline.

COASTAL BEND

Very hot and dry conditions continued. Cotton crop conditions were deteriorating rapidly. Cotton was shedding small bolls. Harvest had begun on a small scale, but a lot of cotton fields were defoliated, and harvest should be in full swing soon. There was a range of maturity and yield potential in cotton, and harvest could take a while. Corn was being harvested. Grain sorghum harvest was nearly complete. Yields for both corn and sorghum were exceptional. Rice was nearly all headed out with some fields being drained in preparation for harvest. Rangeland and pasture conditions continued to decline. Livestock were still in good shape in most areas, but pastures were deeply grazed, and forage depleted fast. Producers were keeping a close eye on water sources, and very little hay was being baled. Cattle prices were near record levels. 

EAST

Dry, hot conditions continued across our region. Burn bans took effect in some areas. High temperatures contributed to soil moisture losses. Subsoil conditions were short to adequate, while topsoil conditions ranged from very short to adequate. Pastures, hay meadows and rangeland were in fair to good condition with many showing signs of drought stress. Producers were culling cattle due to drought conditions. Livestock were in fair to good condition. Some producers were spraying grasshopper infestations. Wild pigs continued to cause damage. 

SOUTH PLAINS

Isolated rain showers across the district helped with some fields and pastures. Soil moisture levels were short to adequate. Several farmers plowed their cotton under. Excessive heat and wind continued to dry out grass and croplands. Most crops were in fair to poor condition. Cotton conditions were fair overall and heat units were beneficial, but fields needed moisture. Producers were running pivots. Cattle were in good condition. Pasture and rangeland conditions were poor to fair.

PANHANDLE

Conditions were much dryer with limited showers and 100-plus degree temperatures. Crops were in fair to good condition. Corn, sorghum and soybeans were developing nicely. Many corn fields were beginning to tassel and silk. Producers performed much-needed tillage and spraying of weeds in fallow fields and fields to be planted in wheat. Producers were hoping to make a crop on late plantings of sorghum silage and hay grazers. Rangeland and pastures were in much better condition than predicted. The overall condition of pasture and rangeland was fair to good. Restocking of some rangeland was occurring on a limited basis, but time was still needed for most forages to fully recover. Most counties reported adequate soil moisture.

NORTH

Topsoil moisture ranged from very short to short. Most counties received scattered rain with some areas reporting 1-3 inches. Corn was doing well, and producers were expecting exceptional yields. Grain sorghum, cotton and soybean growth looked excellent as well. Livestock conditions were good. Pastures and rangeland were in poor to fair condition.

FAR WEST

Most counties were in extreme drought conditions. Daytime temperature highs ranged from 108 to 115 degrees and overnight lows in the upper 70s. No precipitation was reported. Severe drought conditions killed most hay grazer and cotton. Producers were anxiously awaiting the start of seasonal monsoon rains as pasture conditions were beginning to deteriorate rapidly. Pasture conditions were very poor, and there was no green grass to be found. Livestock producers continued supplementing livestock with cubes and hay. El Paso County Water Improvement District has released river water, which will help farmers. Irrigated cotton and pecans looked very good. Forage crops, such as alfalfa and Sudan grass, also looked very good. Very limited pest and disease pressure was reported. Forages in rangeland were nonexistent, but some smaller irrigated pastures were decent for grazing. 

SOUTHEAST

Some areas received rainfall. Temperatures were in the mid- to upper-90s. The ground was dry and cracking. Soil moisture levels were very short to adequate. Some rice harvesting could begin soon. Cotton was in fair condition, and corn harvest was around the corner. Pastures needed rain. Hay was being cut, but the quality and quantity of forage production slowed down. Fire danger was high, and burn bans were in effect for some counties. Springtime optimism was waning as cattle volumes at local livestock markets rose drastically over recent weeks, but prices remained incredibly strong. Rangeland and pasture ratings were very poor to good. Signs of drought stress were beginning to appear on several tree species. Grasshoppers continued to be a problem.

SOUTHWEST

Conditions were dry and very hot. Dryland cotton was showing signs of stress. Corn and sorghum harvests began, with only small portions of fields harvested so far. Dry conditions continued to deteriorate pasture and rangeland conditions. A late-season hay cutting was unlikely. Some supplemental feeding of livestock resumed. Insect pest loads were increasing in pastures and orchards due to dry conditions. High temperatures continued to stress livestock and wildlife. Turkeys and deer were feeding on wild mustang grapes. The Guadalupe River flow stopped, and small pools of water formed.

SOUTH

Temperatures were over 100 degrees and conditions remained dry. Grain corn and sorghum harvests were almost complete. Cotton was coming along quickly with dryland fields struggling. Peanuts were being irrigated, and later-planted peanuts were struggling more than early planted peanuts. Sesame looked good, and sunflowers were starting to mature. Forage producers with irrigation were watering and cutting. Fieldwork was starting for strawberry producers. Fruit and nut trees were suffering under the hot, dry weather. Watermelons, cantaloupes and Coastal Bermuda grass irrigated by the local water canals were in good condition. Citrus and sugarcane crops were being irrigated. Turfgrass growers were having a difficult time keeping up with crop watering demands. Some cattle were starting to lose the body condition gained from the spring rains. Livestock and wildlife producers were supplemental feeding, and some were beginning to provide hay. A higher percentage of cull cows and bulls were being offered at market with strong prices reported. Some producers had liquidated their herds. Rangelands had some grass standing, but most rangeland had little forage.