Wheat prices soared to 9-year highs on Tuesday morning thanks to global supply issues and strong demand. The U.S. Department of Agriculture (USDA) rated only 45 percent of the 2022 winter wheat crop in "good to excellent" condition, a decline of 1 percent from the prior week. Analysts had expected a rating of "good to excellent" on 48 percent of the US crop.
Russian wheat prices also rose last week, due in part to a poor spring harvest and an export duty demanded by Russia. Demand has also increased from Egypt, the world's largest wheat importer. Saudi Arabia also increased its recent wheat purchase, buying approximately 1.268 million metric tons of milling wheat that surpassed most analysts' expectations.
As recently as September 30, the USDA's Economic Research Service (ERS) highlighted the dire situation, explaining that wheat stocks as of September 1, 2021, were at their lowest point for the same date since 2007. Based on these finding and a continued supply glut, the season-average farm price for wheat is now projected to be $6.70, up 33 percent from last year.
Global wheat stocks are expected to be down 6.0 million metric tons in the 2021/2022 season, the commodity's lowest point since the 2016/2017 season. The decline in wheat supply resulted from multiple factors that impact global wheat growers from Canada to Russia, including recent drought, heavy rains, frozen lands, and labor shortages thanks to COVID-19. To combat the shortages in the US, Canada and Russia, wheat importers are stocking up on EU wheat, sending the region's exports up 25 percent since last year.
Also weighing on prices are fertilizer shortages and a rise in fertilizer prices which is directly passed on to wheat purchasers.
Corn prices declined 0.2 percent on Tuesday. The US corn crop harvest reached 74 percent, well outpacing the five-year average of 66 percent for this time of year, but behind the average analyst expectation of 75 percent of the harvest completed.
The US soybean harvest is now 79 percent complete, the USDA reported yesterday, behind the five-year average of 81 percent completion. Soybean prices were up 0.34 percent as of 9:28 a.m. GMT on Tuesday.