High prices do not guarantee higher US wheat production

US wheat prices are at their highest level in three years, but this does not necessarily guarantee a significant increase in production. Food wheat futures have risen by around 39%, while farmers continue to face high fuel and fertilizer costs as well as drought across the southern Great Plains.

AgResource estimates that US winter wheat acreage could increase by around 10% y/y this autumn as producers seek to benefit from higher prices. However, total harvested wheat area remains near historically low levels after years of farmers favoring corn and soybeans.

Weather remains one of the main risks. Drought is already complicating planting in Kansas and other parts of the southern Great Plains, although El Niño could potentially bring more rainfall to the region during autumn and spring.

The global wheat market also remains tight. Stocks in key exporting countries are estimated to be among the lowest on record, while wheat area in Australia has fallen by 12% due to expectations of dry weather and higher fertilizer costs.

Disruptions to Black Sea exports are providing additional support to global prices. Analysts note that even where grain stocks are available, logistics constraints are slowing their movement onto the world market and increasing delivery costs.

Tags: prices, wheat, USA