Agricultural News
OSU's Kim Anderson Fears Tight Wheat Stocks in this Marketing Year
Mon, 16 May 2022 11:54:47 CDT
KC Sheperd, Farm Director, caught up with OSU Crop Marketing Specialist, Dr. Kim Anderson at the Lahoma Wheat Field Day. Anderson mentioned what the future looks like for the wheat market and how it will be impacted by how Russia's invasion of Ukraine.
"I think the new crop numbers came out relatively close to what we expected," Anderson said. "Hard red winter wheat over the entire nation is significantly lower than last year."
Anderson said Oklahoma wheat production is at 60 million bushels. The crop tour estimated 58, and they are feeling good about that number, he said.
"Talking to people today, I think most of them feel that we are going to be lucky to get 58 or 60 million, especially with the weather forecast with the hot, dry weather potential over the next couple of weeks," Anderson said. "Nationwide, the overall U.S. wheat production numbers are close to last year. We are looking at reduced ending stocks, especially for hard red winter wheat, and a small reduction in stocks for the U.S."
Before the Russian invasion, Anderson said we had wheat prices in the seven- or eight-dollar range.
"You go back to when we put this in the ground, you could forward contract for harvest delivery for seven dollars, plus or minus 20 cents and it stayed relatively level until we hit into February when the invasion happened," Anderson said. "When that happened, those prices kicked from eight dollars and got up over 11 dollars and now over 12 dollars."
Anderson said he thinks part of that increase is that our crop conditions deteriorated. Another big part of it, he said, was Russia and Ukraine and the lack of exports out of the black sea area.
"I don't think we can produce ourselves out of those tight stocks in this market year," Anderson said. "The U.S. winter wheat crop production is already established, and that number is relatively close."
It can go down in the hard red winter wheat areas where it is hot and dry, Anderson said, and it may come up a little bit in the winter wheat areas or the soft red winter wheat areas.
"However, I think our production is relatively fixed," Anderson said. "In the southern hemisphere, Australia and Argentina can come in with increased production, but you have got those high input costs and fuel costs that are going to impact that."
Anderson said he does not see us being able to alleviate this tight stock situation over the next 12 months.
On the other hand, Ukraine doesn't know where to go with their wheat.
"Ukraine is trying all kinds of things," Anderson said. "They are loading trains and shipping it to Romania."
Ukraine finally shipped a cargo load out of Romania, Anderson said, and they are looking at going across the land to the European Union and trying to export that way.
"I think if you look at Ukraine, their production is projected to be about 60% of the average, however, they have got excess stocks because they haven't been able to export in the last few months," Anderson said, "So, they probably will have less wheat to export than they normally do if this war ends, but they are still going to have quite a bit to export."
On the other hand, Anderson said, Russia had a record production of around 3.3 billion bushels. Plus, they reduced their exports over the last year or year and a half, he added.
"They have got a lot of wheat they can put on the market," Anderson said. "That is pretty smart. I mean, they were exporting wheat at seven dollars wheat, and now they can export 11 and 12-dollar wheat.
That is good merchandising, Anderson said, and Russia will take advantage of it. The lasting effects of Russia's invasion of Ukraine are to be seen, he added.
"If Russia comes in and destroys those export elevators and that export system gets taken out, it is going to have a long-lasting impact," Anderson said. "If those export facilities stay open, no matter who has them, both Russia and Ukraine are going to be trying to put product in those."
Click the LISTEN BAR below to hear KC's full interview with Dr. Anderson on Russia and Ukraine's impact on the market and advice for producers.
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