Wheat prices are at their highest level in three years, which means farmer Merrill Nielsen should be getting more for his crops out of his 2,500-acre (1,010-hectare) Kansas farm. Yet even as future prices for bread-type wheat are up 39%, Nielsen is unsure whether increased prices will raise his bottom line. The price of diesel fuel, which he needs to run his tractor, has hit record highs.
Then there’s the erratic weather that made him lose his entire wheat crop in the spring, and drought has overtaken the southern Great Plains. Really, we’ll have to see what the weather does for us,” Nielsen said. The combination of high costs, poor weather and geopolitics leave US farmers such as Nielsen with an uncertain growing season despite higher prices for their yields.
It also leaves consumers, from millers and bakers to restaurants and grocery shoppers, at risk of feeling the pinch. Droughts across the US and Europe have been shriveling harvests, and weather forecasts for a “super” El Niño this year means “there are some alarming signals” about the impact of weather on wheat crops, said Joao Lampreia, a market strategist at the Lisbon-based Freedom24. The weather phenomenon, exacerbated by the climate crisis, causes warm waters to rise to the surface across the equatorial Pacific Ocean, along the coast of South America, and is known to imperil agriculture in the southern hemisphere significantly.
Experts say wheat supplies in key exporting countries are at their second-lowest levels on record. Already, Australia’s wheat plantings are down 12% due to expectations of dryness and increased fertilizer costs. The good news for farmers and consumers is that El Niño can also bring wetter conditions for the southern Great Plains in the fall and spring.
During the last big El Niño in 2015 and 2016, the US set an all-time record-high winter wheat yield, said Mark Welch, an economist who researches grain marketing at Texas A&M University. Even if the weather impacts turn out better than expected, recent Russian attacks on port facilities in the Black Sea, where one-third of the global wheat trade passes through, have also disrupted grain shipments. Black Sea farmers, who were some of the few global wheat exporters to experience a bumper crop, had just wrapped up their harvest before the attacks.
Because of the fighting, supply is largely inaccessible, which has pushed prices up, Welch said. But if Black Sea farmers and shippers can find alternative routes, prices will backtrack somewhat. At best, about 35% to 50% of that wheat could find a way out, but it will take longer and cost more to get, Lampreia said.
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