Wheat prices soar on concerns of Russia-Ukraine war, drought

Prices were trending upward before Russia invaded Ukraine, casting doubts of whether one of the biggest wheat-exporting regions in the world would be shipping grain in 2022.

With cash grain prices at record highs and Russia’s war on Ukraine likely to push them higher still, one might assume that farm trucks would be lining up a mile deep at grain elevators hoping to cash in as they’ve done before.

Not so, says Mitch Konen. The Fairfield wheat farmer said many farmers, himself included, were hit so hard by the 2021 drought that it took everything they could harvest just to fill contracts that were supposed to be just 30% of what they would cut in a normal year.

“You see $10 cash prices, now. That’s only good if you’ve got it in the bin,” said Konen, past president of Montana Grain Growers Association. “There are probably not a lot of people who have grain in the bin to sell because they already sold it.”

Montana’s 2021 wheat harvest of 100.85 million bushels, was just 49% of the 10-year average, according to USDA’s National Agricultural Statistics Service.

The last time wheat prices were in this territory was 2008, the start of the Great Recession, a time when positive Montana grain sales buoyed a state economy that was being rocked by a collapse in the housing industry. It marked the first time state wheat sales were valued at $1 billion or more.

This round of robust prices might not produce the same outcome, as Montana farmers enter the second year of an extended drought with little wheat in reserves and farmers concerned about whether spring moisture will turn things around.

Prices were already trending upward before Russia invaded Ukraine, casting doubts of whether one of the biggest wheat-exporting regions in the world would be shipping grain in 2022 or selling at a price damaged by sanctions. Ukraine accounts for 20 million to 29 million metric tons of the world’s wheat exports, depending on the weather. That’s 10% to 15% of world exports, according to the U.S. Department of Agriculture.

If Ukraine wheat doesn’t ship, or planted acres are down, it will influence export prices, said Vincent Smith, economist at the Montana State University’s Department of Agricultural Economics and Economics.