A recent report from CoBank’s Knowledge Exchange has brought attention to the significant risk faced by U.S. wheat elevators, primarily stemming from Russian wheat exports and other global factors. Published on September 19, the report provides valuable insights into the state of the wheat market and its implications for U.S. wheat producers and distributors.
One of the central concerns highlighted in the report is the overwhelming presence of Russian wheat exports in the global market. The influx of competitively priced Russian wheat has created a deceptive sense of stability in the world wheat market. CoBank’s grains and oilseeds economist, Tanner Ehmke, cautioned, “The greatest margin risk to storing wheat is the shrinking world wheat crop outside of Russia and China, which leaves the market vulnerable to supply shocks and extreme volatility in wheat prices.”
HIGH STORAGE COSTS REMAIN A CHALLENGE
The report underscores that storing grains, including wheat, remains historically expensive due to the sharp rise in interest rates. As a result, wheat elevators face difficulties in achieving profits from wider carries, especially for hard wheats. In light of these challenges, elevators are exploring opportunities to benefit from rising basis on company-owned grain throughout the marketing year.
U.S. WHEAT HARVEST
The U.S. wheat harvest has experienced notable fluctuations across different wheat varieties. The soft red winter wheat harvest in the Midwest has seen significant gains, rising by 31% year-over-year. In contrast, the production of hard red winter wheat in the Central and Southern Plains increased by 10% due to expanded acreage. However, protein premiums have declined due to the abundance of protein in the hard red winter wheat crop.
GLOBAL WHEAT SUPPLIES
The report emphasizes that the global wheat market is facing significant challenges. While Russian wheat exports dominate, issues such as drought in Argentina, Canada, and Australia, as well as ongoing geopolitical conflicts, have reduced wheat supply. China’s wet weather during harvest damaged a portion of its wheat crop, possibly leading to increased wheat imports. Additionally, India’s ban on white rice exports is shifting demand toward wheat in various importing regions.