The war between Russia and Ukraine has upended grain flows from the Black Sea region for months. Since the first days of fighting in late February, Ukraine’s export terminals in the southern part of the country have been closed. This from a nation that provides 10 percent of the world’s wheat exports and 12 percent of global corn exports.
As fighting continues, the threat to grain supplies extends beyond the export of old crop grain (2021/2022 marketing year) to the production of the 2022 crop. Russia, with its military control of the region, may still be able to provide wheat to its trading partners. The world wheat trade has other participants that may be able to increase their sales.
The impact of the conflict on the feed grain market may be harder to compensate for. Ukraine is the fourth largest corn exporter, 23 mmt in 2021/2022, 12 percent of the world total, and there are not many other major export providers of feed grain. After Ukraine, the next largest corn exporter is the EU at 4.9 mmt or 2.5 percent of total exports. Much uncertainty surrounds Ukrainian agriculture and market participation in the upcoming crop year in terms of productive capacity, foreign market access, and export controls due to domestic food security concerns. What will the implications be for 2022 world feed grain fundamentals—supply and demand—without the contribution of Ukrainian agriculture?
In this article, feed grain statistics are those reported for world coarse grains by USDA (corn, sorghum, barley, oats, rye, millet, and mixed grains) as well as wheat for feed. Since 1980, wheat for feed has constituted about 20 percent of total world domestic wheat use (Figure 1). The contribution of wheat as a feed grain for this analysis will be 20 percent of total wheat production, use, and stocks.
Without Ukraine, feed grain supplies in the 2022/2023 marketing year would decrease by about 60 mmt: 53 mmt for coarse grains and 7 mmt of wheat (USDA, WASDE, 2022). A simple linear regression model of the response in consumption to a supply change in feed grains yields a regression coefficient of +0.34, in that a 60 mmt decrease in supply would have an estimated 20 mmt decrease in use (Figure 2).
Using those estimates, without Ukraine, the feed grain days of use on hand at the end of the marketing year would fall to a 78-day supply in the 2022/2023 marketing year, down from an 85-day supply for 2021/2022. This extends the downward trend of the last six years, a time frame in which the marketing year average price of corn, which accounts for over 70 percent of all feed grains, has increased from $3.36 per bushel to a current estimate of $5.80 per bushel. This would be the lowest days of use on hand number since 2013/2014 (Table 1 and Figure 3). The years of tightest stocks to use in feed grains (lowest days on hand) since 1980 was from 2003/2004 to 2012/2013.
If, instead of a complete loss, the supply of feed grain in the upcoming marketing year from Ukraine were to decline by half, that would reduce world feed grain supplies by 30 mmt and use by about 10 mmt. The resulting days of use on hand at the end of the marketing year would be an 81.6-day supply. The impact of the Russia/Ukraine conflict is having severe and significant impacts on the world grain trade. In the short term, this impact is creating the tightest supply situation for feed grains that we have seen in the last ten years. The World Food Program’s emergency coordinator in Ukraine expects 20 percent of planted acres will not be harvested this July and that spring planted area will be down by about one third (Reuters, 4/21/2022). Even if this conflict were to be resolved relatively soon, damaged infrastructure will limit commodity shipments for an extended period of time. The longer drawn out the conflict, the greater the magnitude of fundamental adjustments that will be required
Figure 1. World wheat feed use as a percentage of total domestic use, 1980/1981-2021/2022
Figure 2. Response in feed grain use to a change in feed grain production
Table 1. World feed grain production, use, stocks, days on hand, and the corn marketing average farm price
Beginning stocks, mmt
Ending Stocks, mmt
Days on Hand
U.S. Corn MYA $/bu
Figure 3. World feed grain production, use, and days of use on hand at the end of the marketing year, 1980-2021, and 2022 estimate
It is generally the case that the U.S. cotton market is influenced by aggregate production uncertainty. One reason for this is that a majority of the U.S. acreage is planted in Texas (Figure 1), with much of that under dryland conditions contributing to historical abandonment rates between 4% and 62% statewide. In drought years like the current one, this production risk is only heightened. The management of this risk is potentially helped by publicly available market information data.
The first upcoming major information source is the May 12th USDA “World Agricultural Supply and Demand Estimates” (WASDE) report published by the USDA’s World Agricultural Outlook Board (https://www.usda.gov/oce/commodity/wasde ). The May report is notable for publishing USDA’s first official, comprehensive projections of U.S. and world crop supply and demand variables. Historically, the May WASDE report tends to be closely watched and is frequently associated with cotton market volatility.
Like other crops, U.S. cotton is monitored by weekly crop condition reports and crop progress reports (on Mondays) from USDA’s National Agricultural Statistics Service (NASS, https://www.nass.usda.gov/). Because cotton is a perennial bush in its native habitat, its growth and response to stress are different from annual grain crops. Hence there is less correlation between weekly crop conditions and progress for cotton yield outcomes compared to grains. Nevertheless, the news media and some market analysts pay attention to these weekly observations between the major report milestones.
For U.S. cotton, the September WASDE report represents the first extensive proven yield sampling for areas outside of South Texas, in addition to grower interviews. This sample-based production estimate is refined in subsequent WASDE reports through December, as well as with data on cotton ginnings. The uncertainty about cotton yield may be further exacerbated in 2022 from restricted input applications. For example, anecdotal evidence of reduced quantities of nitrogen fertilizer applications (due to the higher cost) could contribute to lower-than-average yields. The resulting yield effect from fewer inputs might not be realized until the ginnings data in November. Hence, this season could involve extended price volatility beyond the normal resolution of weather market uncertainty.
In the Prospective Plantings report released March 31st by USDA-NASS, total planted rice acreage for 2022 was projected at 2.452 million acres, down 3% or 80,000 acres from last year. If realized, this would be the lowest acreage of rice planted in the United States since 1987. The majority of the acreage reduction is due to a 60,000 acre decrease in California, which grows medium and short grain rice. Long grain acres, the main type grown in the Southern states, is projected at 1.943 million acres, down 1.4% from last year. Arkansas remains the largest growing rice state with 1.191 million acres, accounting for 49% of all acreage. Louisiana is the only state to increase acreage, adding 20,000 acres for 440,000 acres total, while Mississippi’s 100,000 acres is the lowest since 1975.
Higher input costs played a key role in producer unwillingness to add rice acreage this year. Enterprise budgets from Mississippi State University’s Department of Agricultural Economics project rice production expenses to increase by 10% to $899/acre averaged across production practices. A large driver of this increase is fertilizer costs, which are projected up 43%. University of Arkansas budgets project similar increases, with a 47% increase in production expenses from last year. Additional supply chain uncertainty for herbicides needed in rice production makes a lower input intensive crop like soybeans more attractive to producers.
Additionally, long grain rice had to compete with a better price outlook for alternative crops, such as corn and soybeans. The chart below shows the percent change in the harvest month futures price for corn, soybeans, and rice since December 1, 2021. The November CBOT Rough Rice futures contract price has increased approximately 20% since the 1st of December. The percent price increase of corn and soybeans though has outpaced rice at 25% for soybeans and over 35% for corn. The combination of higher input costs and a lower price relative to other crops has likely made producers take a longer-term outlook of the rice market. Lower acreage will continue to support the upward trend in rice prices seen this spring. While supplies are not necessarily tight at this point, we can expect increased price volatility due to any events that might influence production during the growing year. As of April 25th, the USDA-NASS Crop Progress report has rice planting at 26% complete compared to the 5-year average of 47%. If plantings remain stalled, the market will begin to worry about supply and push prices higher.
Peanut acres in the U.S. decreased 5% in 2021, but with strong yields, total production ended almost 9% higher than in 2020. The 2022 crop year is shaping up to start with a similar story on acreage. However, early indications point to the potential for a different result at the end of the year. The prospective plantings report by the USDA was released on March 31, 2022, which showed U.S. peanut farmers intend to plant 3.4% fewer acres in 2022 compared to a year prior. This decrease in intentions has been driven largely by high prices for other row crop alternatives and thus favorable marketing opportunities for other crops. This competition for acres has been recognized by shellers who have offered higher contracts over the past few months than had been offered in recent years.
While a decline in acres of less than 4% does not seem to be very much, especially after a year of high yields, the distribution of that decline has the potential to have a much larger impact on production. In 2021, the top three states in planted acreage were Georgia, Alabama, and Florida (see Table 1). These three states accounted for about 71% of the total U.S. peanut acreage last year and are forecast to plant 95,000 less acres this year, a decline of 8.2%. Offsetting some of those lost acres are increases in South Carolina and Texas, with 20,000 additional acres planned in each state. The challenge here is going to be the weather.
The West Texas area where peanuts are produced is currently facing extreme drought (U.S. Drought Monitor as of April 14, 2022). The National Oceanic and Atmospheric Administration (NOAA) expects this drought to continue or expand throughout the spring. This may make planting extremely difficult in that region. Even if that intended acreage is achieved, it will be important to watch how yields develop, given the expected continuation of dry weather. Texas is also not the only part of the peanut belt with dry weather. Abnormally dry and moderate drought continues across the peanut belt in Alabama, the Florida Panhandle, Georgia, South Carolina, and North Carolina (U.S. Drought Monitor as of April 14, 2022). Beyond spring planting, the southeast expects neutral conditions where tropical moisture will determine if drought conditions persist (Knox 2022).
So, on the surface, a small decline in acreage after a large crop may help balance ending stocks for the 2022-23 marketing year. This would take the current 2021-22 forecasted ending stocks of 2.3 million pounds and significantly tighten market supply. However, the location of increased acres, current drought and dry conditions, and the potential for persistent drought throughout the summer could significantly impact the fall crop and the peanut market. The risk of lower yields and less harvested acreage could potentially drop ending stocks significantly to 2016-17 levels of around 1.5 million pounds.
Table 1. Peanut Acreage in 2021 and 2022 Prospective Plantings
Source: USDA NASS Prospective Plantings, March 31, 2022
World wheat supplies are tight, and Russia’s invasion of Ukraine puts at risk a significant portion of the world’s wheat supply. World wheat ending stocks in the 2021/22 marketing year are estimated at 278 mmt, the lowest since 2016/17 (263 mmt) (USDA, FAS, PSD, 2022). In the current marketing year, Russia is expected to account for about 10 percent of global wheat production (75.16 mmt) and 16 percent of global wheat exports (33.00 mmt) (Figure 1). Ukraine’s wheat production is about four percent of the world total (33.00 mmt) and its 19.00 mmt of exports is 10 percent of the world total.
With its control of the Black Sea, Russia has the ability to continue exporting grain in the midst of this conflict. One impact of economic sanctions may be to change the normal allocation of Russia’s wheat exports. But with strong global demand and Russian wheat priced competitively in global markets, it seems unlikely that total Russian wheat exports will fall substantially.
Ukraine’s ports have been closed since the first day of fighting and the Ukrainian government has banned some grain exports to ensure domestic food supplies. The 2022 wheat crop is at risk not only in active conflict zones but more broadly due to shortages of equipment, fuel, fertilizer, and labor. Where harvest is possible, it is safe to assume infrastructure damage (e.g., storage, roads, rail, ports) will impact the movement of agricultural products from field to international markets.
What is the worlds’ capacity to make up for the loss of wheat exports from Ukraine, which average about 18 mmt, just below the current marketing year’s 19 mmt? In addition, the global wheat trade has increased 11 mmt over the last five years. In the short-term, exports have increased significantly from Argentina, Australia, the EU, India, and Brazil (Figure 1). In the 2021/22 marketing year, Argentina’s exports are up 2 mmt from its most recent five-year average. Australia is projected to export an additional 12 mmt. Exports from the EU are up 5 mmt. India’s wheat exports are up 8 mmt compared to its 5-year average and Brazil’s wheat exports are up 2 mmt. These combine for an increase of 28 mmt.
Major wheat exporters whose sales are down in 2021/22, compared to the 5-year average, are the U.S. and Canada. Both had significantly smaller spring wheat crops in 2021. U.S. wheat exports are down 5 mmt and Canada’s sales down 8 mmt. A return to normal would add 13 mmt to world wheat exports in 2022/23.
All wheat acres in the U.S. for 2022 are up about 700,000 from 2021 to 47.4 million (USDA, Prospective Plantings, 2022). Across the South, wheat acres increased in Alabama (+3%), Arkansas (+5%), Kentucky (+6%), Mississippi (+5%), North Carolina (+16%), Tennessee (+5%), and Virginia (+22%). Wheat acres were unchanged in Oklahoma and Texas. Acres were down in Georgia (-5%), Maryland (-12%), and South Carolina (-4%).
Further complicating the wheat market, drought conditions in the U.S. Southern High Plains look to decrease winter wheat yields and increase unharvested acres in this region. For U.S. and Canadian wheat production to increase and augment exportable supplies, favorable growing conditions are needed for the upcoming spring wheat crop.
While the loss of Ukraine’s wheat crop in 2022 would have a significant impact on world wheat supplies, high commodity prices are providing incentives for agricultural producers around the world to plant more acres. However, the loss of Ukraine’s production amplifies the importance of production disruptions in other wheat producing regions, should issues occur. Longer-term production will certainly increase as weather and crop input availability and affordability allow.
Figure 1. World Wheat Exports, average 2016/17-2020/21 and 2021/22 (million metric tons)
On Thursday March 31, USDA released the Prospective Plantings report. Nationally, principal crop acres planted were projected at 317.375 million, up 214,000 acres compared to last year. Corn acres were projected at 89.490 million, down 3.867 million compared to last year. Soybean acres were projected at 90.955 million acres, up 3.76 million acres compared to last year. Cotton acres were projected up 1.015 million acres at 12.234 million acres. All wheat acres were projected at 47.351 million acres, up 648,000 compared to last year. Compared to projections released in February at the USDA Outlook Forum, March projections were for 2.51 million fewer acres of corn, 466,000 fewer acres of cotton, 2.955 million more acres of soybeans, and 649,000 fewer acres of wheat.
The change in projected acres planted from February to March estimates were not surprising considering price trends in February and concerns over high fertilizer prices. On December 1st, the 2022 harvest soybean-to-corn futures price ratio was 2.21 — a price that would historically favor planting corn over soybeans. By February 15th, the ratio had moved to 2.45 – a price ratio that would normally be neutral to favoring soybeans. From a cost of production standpoint, higher fertilizer prices create an input cost disadvantage for planting corn, , thus a ratio of 2.45 would definitely favor planting soybeans.
Markets reacted to the Prospective Plantings report mostly as expected with harvest contracts for corn up 27 ¾ cents, soybeans down 49 ¾ cents, cotton down 1.16 cents, and Chicago wheat down 21 cents. Moving forward, many producers likely have a good idea regarding what they are going to plant. Weather is the wild card that could shift acres. However, the price ratio moved in favor of corn after the Prospective Plantings report was released. The soybean-to-corn harvest futures price ratio on April 5th was 2.06 — strongly favoring corn. Will we see an increase in corn acres planted? The next USDA acreage estimate will be the June 30 Acreage report.