CHESTERFIELD, MISSOURI, US — High prices for US corn, soybeans and wheat are not expected to be a short-term shock, according to a new RaboResearch report, “The Grain Drain After Ukraine.”
Corn and wheat prices have risen to their highest in a decade with the sudden shutdown of trade in the Black Sea region. The 10-year outlook for all major crops has shifted up to a new price level due to transformative geo-political changes, continued increases in demand and limited acreage availability, according to the report.
Trade routes shipping agricultural products from the Black Sea region to other parts of the world have effectively shut down because of the war in Ukraine. The continuing conflict will cut supplies of corn and wheat available to the global market, Rabobank said.
The United States is expected to increase its exports to help fill the gap. Additional demand for US products should also increase the prices paid to farmers for these crops. A 200-million-bushel increase in exports for each commodity would increase the 2022-23 average on-farm price for corn by 13% and wheat by 50%.
“We projected US farm prices to be strong this coming year,” said lead report author, Andrick Payen, grain and oilseed analyst with Rabo AgriFinance. “But the Ukrainian conflict is likely to push wheat prices to reach record highs.”
For the 2022-23 crop marketing year, RaboResearch estimates the average on-farm price, which takes local basis into account, to be $5.77 for corn and $10.50 for wheat when their export sales increase by 200 million bushels.
This year’s report is also the first annual outlook to incorporate the expected expansion of US soybean crush capacity into the 10-year acre and price estimates.
With growing demand for soybean oil in the production of renewable diesel, the crush capacity expansion is driving long-term commodity prices to a higher level, according to the report.
Higher prices, however, do not spell bigger profits. Costs for farm inputs such as seed, fertilizer and land also will likely rise, squeezing farmers’ margins over the next decade. Grain companies will have to navigate great volatility in their trading activities. Livestock producers likely will face higher feed prices.