Prices could plateau at the grocery store.
Wheat prices are down a bit as trade from Russia and Ukraine has stabilized despite fierce fighting, an agricultural economist told a room full of farmers Wednesday morning at the Spokane Ag Show.
Though the United States doesn’t import wheat from either nation, global wheat prices are linked, said Randall Fortenbery, chair of the Washington State University School of Economic Sciences.
Fortenbery predicts wheat prices will not be as high in 2023 as they were in 2022, assuming there is a normal yield when farmers harvest.
“What really matters for U.S. wheat is what happens in the world market, because everybody produces it, everybody consumes it,” he said.
Fortenbery presented two conflicting estimates for world wheat stocks in the coming year: The U.S. Department of Agriculture estimates they will be down 2.6%, while the International Grains Council predicts supply will be up 3% compared to last year.
He doesn’t discount either one, but he leans toward the International Grains Council number.
Supply and price are inversely correlated, so when world supply goes down, the price goes up, and when supply goes up, the price goes down.
Wheat prices have stabilized since August, when Russia and Ukraine negotiated a safe passage agreement allowing both countries to safely export through the Black Sea. Prices are about back to where they were before Russia invaded Ukraine, Fortenbery said.
Both countries are expected to have significant wheat crops this year. As long as the agreement continues, this will increase world supply.
“We don’t compete directly with (Russia and Ukraine) in most countries,” Fortenbery said, “but it still affects overall trade.”
Other factors could impact the market .
At the agriculture expo on Tuesday, weather expert Art Douglas predicted an El Niño this year will bring drier conditions to the Northwest, which will challenge the regional wheat crop.
Inflation can increase the costs of farming, reducing profit margins.
Over the long term, the U.S. needs to look at population growth in the countries it sells to, Fortenbery said.
He also noted that Washington’s apple industry remains strong.
Some 70% of all apples produced in the U.S. come from Washington, for example. Even though production dipped after last year’s cold and wet spring, the rest of the country’s apple growers didn’t fill the vacuum.
“We are still maintaining our market share relative to the rest of the national production,” Fortenbery said.
Washington’s apple growers have shifted away from the out-of-favor Red Delicious to meet consumer tastes that want apples such as Honeycrisp, Fortenbery said.
“Much of this is in response to consumer demand,” Fortenbery said.
There is less data for one of the newest apple varieties, Cosmic Crisp, which came on the market in 2019. Cosmic Crisp’s price has dropped significantly since then.
This year for the first time, Cosmic Crisp is below the price of Honeycrisp.
“That’s really a supply situation,” Fortenbery said. The price has responded as the new variety increased in supply over the past three years.
“I suspect we’ll see this price coming closer to the Honeycrisp price and those two stabilizing and being good competitors,” he said.
Cattle and dairy are the next-largest industries in Washington.
Current U.S. inventory includes about 91 million cows, which is down from a peak in the late 1970s. These are the lowest numbers since the United States started keeping record, Fortenbery said.
While the majority of Washington’s apples stay in North America, 92% of the state’s total agriculture exports go to Asia. Since the populations of these Asian countries are projected to decline over the next 70 years, the U.S. will need to find new markets .
Of those Washington exports to Asia, 60% go to China. That represents significant risk, given increasing tensions between the U.S. and China.