Some experts worry factors affecting wheat exports could push global food prices even higher than they are now.
Wheat prices have reached a three-year high, which should theoretically mean increased profits for farmers like Merrill Nielsen, who manages a 2,500-acre (1,010-hectare) farm in Kansas.
Yet, even with futures for bread-quality wheat up 39%, Nielsen is uncertain if these gains will improve his bottom line. The cost of diesel fuel required to operate his machinery has climbed to record levels. Furthermore, erratic weather patterns caused him to lose his entire spring wheat crop, and drought conditions have now spread across the southern Great Plains.
“We’re not looking to plant any more wheat than we probably normally would, or maybe we won’t even plant that much. I don’t know. Really, we’ll have to see what the weather does for us,” Nielsen said.
The convergence of rising operational costs, unfavorable weather, and geopolitical instability leaves American farmers like Nielsen facing an unpredictable growing season, despite the higher market prices for their crops. This situation also threatens to increase costs for everyone from millers and bakers to restaurants and everyday grocery shoppers.
Droughts across both the US and Europe have diminished harvests, and forecasts for a “super” El Niño this year suggest “there are some alarming signals” regarding the weather’s impact on wheat production a market strategist at the Lisbon-based Freedom24
This weather phenomenon, intensified by the climate crisis, causes warmer waters to rise to the surface of the equatorial Pacific Ocean near South America, a process known to significantly jeopardize agriculture in the southern hemisphere. Experts note that wheat inventories in major exporting nations are currently at their second-lowest levels on record. Australia has already seen its wheat plantings drop by 12% due to concerns over dryness and the rising cost of fertilizer.
The potential silver lining for both producers and consumers is that El Niño can occasionally bring increased moisture to the southern Great Plains during the fall and spring. During the last major El Niño event in 2015 and 2016, the US achieved an all-time record-high winter wheat yield, noted Mark Welch, an economist specializing in grain marketing at Texas A&M University.
Even if weather conditions improve, recent Russian strikes on port infrastructure in the Black Sea—a region through which one-third of global wheat trade flows—have severely disrupted grain shipments. Farmers in the Black Sea region, who were among the few global exporters to see a bumper crop, had just finished their harvest when the attacks occurred.
Because of the ongoing conflict, these supplies are largely unreachable, which has driven prices upward, Welch explained. However, if Black Sea producers and logistics providers can establish alternative shipping routes, prices may see a slight correction.
At best, roughly 35% to 50% of that wheat could eventually reach the market, but the process will be slower and more expensive, Lampreia said.
Dan Basse, president of the agricultural market research firm AgReld leave global food prices even higher than they are today. The United Nations’ Food and Agriculture Organization’s
Originally reported by www.theguardian.com. This article has been independently rewritten for republication.
