Russia’s invasion of Ukraine has significantly contributed to the recent surge in wheat prices, as the two nations account for 29% of global wheat production. However, extreme weather conditions in other vital agricultural regions are also anticipated to play a crucial role in driving food commodity prices higher this year and into the future. In the United States, adverse weather has severely impacted planting and yields. According to the USDA’s latest production forecast, farmers are expected to harvest 1.17 billion bushels of winter wheat in 2022, marking an 8% decline from the previous year. The hardest hit will be hard red winter wheat, which is projected to decrease by 21% compared to last year.
Additionally, dry conditions in the Central Plains of the U.S. have resulted in hard red winter wheat harvests being “well below” the five-year average in Kansas, the leading producing state, as noted by Aaron Harries, vice president of research and operations for Kansas Wheat, in an interview with Bloomberg. Crop insurance agents are predicting that some wheat fields may yield as little as five bushels per acre, compared to the usual 35 to 40 bushels.
In the upper Midwest, unusually wet conditions in states like Minnesota and North Dakota have hindered the planting of spring wheat, which is used for making cakes, cookies, and crackers. The USDA’s crop progress report from May 9 indicates that planting in the six largest spring wheat-producing states is only 27% complete, 20 percentage points below the five-year average for this time of year. The USDA forecasts that the average farm price of wheat for the 2022/23 season will reach a record $10.75 per bushel. The stocks-to-use ratio for U.S. wheat, a key indicator of inventory levels, is expected to be 33%, the lowest since 2014, according to an analysis by the American Farm Bureau Federation.
Globally, the situation is similarly bleak. China, the largest wheat producer, may face a reduced winter wheat crop following an exceptionally wet autumn. India, the eighth-largest supplier worldwide, announced export restrictions on wheat over the weekend due to an extreme heat wave that has damaged crops.
Paul Hughes, chief agricultural economist and director of research at S&P Global Commodities Insights, highlighted the pressure on major Northern Hemisphere wheat exporters like Canada, the EU, and Russia to achieve good harvests. “If any of these countries have disappointing crops, wheat prices could soar even further,” he told Food Dive.
The rising trend in wheat prices will inevitably lead to increased costs for related ingredients, including flour. According to the Bureau of Labor Statistics’ Consumer Price Index data for April, the price of flour and prepared flour mixes has risen by 14% over the past year. Baked goods manufacturers, such as Hostess Brands, have had to adjust for these higher costs, even as the maker of Ding Dongs and Twinkies has hedged against commodity price fluctuations for the second quarter, according to its latest earnings call. Hostess plans to implement a second round of price hikes “beginning in the back half” of 2022, as stated by CEO Andy Callahan earlier this May.
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