Invasion, drought and price spikes; world wheat market remains under close scrutiny   

The world is watching and wondering about this year’s wheat harvest—both in Kansas and abroad. The combination of expanding drought conditions and steep input prices in the United States and the continued impact of the Russian invasion of Ukraine has the markets—and farmers on both sides of the world—on edge. A collection of resources from policy-makers and analysts offers insights into the economic impacts of current geopolitics.

“Continued disruption in Ukraine through their wheat harvest combined with expanding drought conditions here at home will continue to weigh on the world wheat market,” said Kansas Wheat CEO Justin Gilpin. “This growing season has the unprecedented combination of geopolitics, weather and some of the highest fertilizer prices and chemical inputs—but farmers here and abroad will remain resilient reminders of the importance of agriculture as a constant in a world full of conflict.”

The world consumes about 787.4 million metric tons (28.9 billion bushels) of wheat each year. Russia and Ukraine are the world’s top and fifth exporters, respectively, according to the most recent available stats from the Food and Agriculture Organization of the United Nations. Together, Russia and Ukraine make up around one-third of the world’s wheat production.

Ukrainian and Kansas wheat farmers follow similar timelines for winter wheat production. The crops planted last fall should be green and growing—marching toward harvest in late June or early July. Following harvest, milling quality wheat from Ukraine is typically exported to the Middle East, Africa and Bangladesh and feed quality wheat to other Asian countries, according to the USDA’s Foreign Agricultural Service in an April 6 international trade report.

The impacts of the Russian invasion of Ukraine and disruption of these trading channels are yet to be fully calculated, but will likely extend beyond this year’s harvest.

“On an aggregate level, global wheat production has been adequate in 2020-21 and only one percent below consumption requirements in 2021-22,” the report read. “However, wheat stocks among major global exporters have tightened in recent years as international trade has grown. Major exporters’ stocks in 2021-22 are forecast to be at their lowest levels in 10 years, putting upward pressure on global prices.”

Unknowns about how intensely and how long the conflict will affect world wheat production are compounded by the moisture concerns Kansas wheat farmers know all too well.

“While the Russia-Ukraine conflict remains the biggest driver of wheat futures prices, U.S. winter wheat in drought conditions across the Plains is becoming an increasingly bullish factor,” wrote Michael Anderson, U.S. Wheat Associates. “This latest concern is likely to overshadow USDA’s recent estimate for a slight increase in winter wheat acres with potentially serious implications for supplies heading into summer.”

Wheat harvest is still weeks away in both Kansas and Ukraine, and a lot could change in that time. The speculation and projections will continue until the combines start to roll, but farmers will remain resilient in the face of whatever adversity they face and committed to stewarding their land and their crops.

Learn more about the impact of the Russian invasion of Ukraine and other factors contributing to high commodity prices from USDA’s FAS.