With spot grain prices at record highs and Russia’s war on Ukraine likely to push them even higher, one would assume that farm trucks would line up a mile deep in front of grain silos in hoping to cash out like they did before.
It’s not, says Mitch Konen. The Fairfield wheat farmer said many farmers, including himself, had been hit so hard by the 2021 drought that they had to harvest whatever they could harvest just to fulfill contracts that were supposed to be worth nothing 30% of what they would reduce in a normal year.
“You see spot prices of $10 now. It’s only good if you have it in the trash,” said Konen, former president of the Montana Grain Growers Association. “There probably aren’t many people who have grain in the bin to sell because they’ve already sold it.”
Montana’s 2021 wheat crop of 100.85 million bushels was just 49% of the 10-year average, according to the USDA’s National Agricultural Statistics Service.
The last time wheat prices were in this territory was in 2008, at the start of the Great Recession, a time when positive Montana grain sales boosted a state economy that was rocked by a slump. of the housing industry. It was the first time state wheat sales were valued at $1 billion or more.
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This round of robust prices may not produce the same result as Montana farmers enter the second year of a prolonged drought with few wheat supplies and farmers wonder if spring moisture will turn the tide.
Prices were already trending higher before Russia invaded Ukraine, casting doubts on whether one of the world’s biggest wheat-exporting regions would ship grain in 2022 or sell at a price damaged by the penalties. Ukraine accounts for 20 to 29 million metric tons of global wheat exports, depending on the weather. This represents 10 to 15% of world exports, according to the United States Department of Agriculture.
If Ukrainian wheat is not shipped or planted acreage is down, it will influence export prices, said Vincent Smith, an economist at the State University‘s Department of Agricultural Economics and Economics. from Montana.
“Exports, from all countries, from all exporting countries, are approaching 200 million metric tons, depending on the year, the weather,” Smith said. “So we are looking at a significant share of global exports.”
Farmers need to consider crop insurance for the coming year and whether it makes sense to enter into contracts for fall delivery, Smith said.
Market prices are tempting. At local elevators, a farmer with regular hard red winter wheat for sale could get $10.95 a bushel at Golden Triangle elevators on Tuesday, according to the U.S. Department of Agriculture. In Great Falls, the cash price was $10.89. The billing was a little under $10.35. These prices are double the price of regular wheat at the same time last year. Regular wheat is generally the cheapest variety, selling for less than wheat graded for more protein.
On Tuesday September, futures for hard red winter wheat at the Kansas City Board of Trade stood at $9.97 a bushel. September contracts for hard red spring wheat closed at $10.10 on the Minnesota Grain Exchange, December contracts closed at $10.09.
One thing Smith cautions consumers against is associating bread prices too much with a beneficial increase in what farmers are paid for wheat.
“From the perspective of the price of a loaf of bread, people need to understand that currently, for every dollar they spend on a loaf of bread, 94 cents covers the cost of getting the wheat to the miller, the baker, at the supermarket,” Smith said. “Only six cents of that, on average, is involved in buying the bushel of wheat that the flour comes from.”
“The problem, probably for all food prices, as well as for all other prices, is in fact the impact of the Ukrainian crisis on the price of oil, diesel and gas. But this is the common problem for all the goods produced, be it a new Ford Escape or a loaf of bread.
There are factors other than the war pushing up the price of wheat, which had been on a strong upward trend before the invasion, said Cassidy Marn, executive vice president of the Montana Wheat and Barley Committee. It is Marn who works directly with foreign buyers of Montana wheat. Like Ukraine, Montana exports up to 80% of the wheat it produces. The state ranks third nationally in wheat production.
Drought is a big concern this year for US wheat, not just in Montana.
“We also had some new drought monitor information, and it’s pretty grim across the United States,” Marn said. “Montana is definitely the worst. But it’s a pretty bad situation, we’re sort of entering a pretty critical period for the southern plains, where they’re looking to harvest not too far away.
The weather could change on the southern plains and drought pressure on the U.S. wheat crop would ease, Marn said. Another hard-hitting turnaround would be the swift end of the Russian invasion of Ukraine.
Montana farmers are no strangers to the mercurial shifts in grain production in the Black Sea region. In 2010, Montana grain prices jumped 60% in just over a month after drought-stricken Russia announced that its wheat production would be down 15 million metric tons. There had been a surplus of 23 million tonnes of wheat before Russia’s announcement. Suddenly, buyers who usually trade with Russia, namely Egypt and parts of Africa, found themselves in the US wheat market.
Similarly, in 2012 Ukraine announced that due to drought it would not export as much grain in November. Montana took advantage of it.