WASHINGTON — Agricultural markets saw widespread change for myriad reasons in the three years since the US Department of Agriculture was last able to invite representatives from across the agricultural supply chains to the nation’s capital.
So said Seth Meyer, chief economist for the USDA, during his opening overview of what attendees could expect to hear during the two-day Agricultural Outlook Forum. The Forum, the USDA’s flagship event now in its 99th year, went virtual in 2021 and 2022 during the COVID-19 pandemic, and evolved this year to a hybrid model, with in-person panels and sessions also streamed online, with some components available only virtually, but accessible later by all registrants.
Mr. Meyer outlined the big picture of disruption for US agriculture in the 2020s to date: COVID and its long tail of economic effects. Prices rising since demand picked up in the fall of 2020. Short crops around the globe. War in Ukraine.
It all adds up to tremendous volatility, he said.
“We have a lot of variability,” he said, displaying a stocks-to-use graph for prominent US crops. “Sometimes we have a bigger crop, sometimes we have a smaller crop. Sometimes rice is doing well and bean markets are tight. But at the end of the day, basically as I’ve measured it, all four of the major commodities were lower than average at the same time in 2022-23, and in those situations where stocks are tight, you’re going to see volatility, and that’s part of what has driven these price movements over the last period of time. We have tight stocks. The market is very sensitive to issues of war or short crops.”
Consumers since 2021 have felt the pressures of food price inflation, Mr. Meyer said. Trends show the trajectory of early 2020’s sudden shift from foodservice to grocery retail to a gradual return to foodservice as food price inflation picked up for lots of reasons, both in commodity markets and beyond the farm gate. Those inflationary pressures have begun to ease, he said.
Mr. Meyer offered big picture looks at crop outlooks he said would be combed over in more detail during the two-day Forum and its dozens of breakout sessions.
Among his insights were that winter wheat planted acres saw a big rebound from 2021-22. Farmers responded to high prices partially due to war in Ukraine. Drought continues in much of the hard red winter wheat planted area of the western Plains. At the same time, 20% to 50% year-over-year acreage increases were noted in soft red winter wheat areas of the Central states, he said.
“That’s because those folks have moisture,” he said. “That’s because the economics suggest that wheat is a good crop. Then maybe you get a little bit of crop insurance coverage expansion that says folks are willing to take a risk on a crop that maybe they haven’t produced before. We will see whether or not those folks will take that additional coverage or not, but they planted soft red winter, perhaps they will plant soybeans following it. Crop insurance at least provides them an opportunity to do so if they find it beneficial at that time.”
War among two major global wheat producers and exporters has been part of the wheat market story for more than a year, Mr. Meyer said. In the first half of 2022, some Ukrainian grain moved over land at a very high cost. After the Black Sea Grain Initiative (BSGI) in the summer of 2022, export volume increased sharply. The initiative sunsets in March if it’s not renewed, and is key to Ukraine’s grain exports.“(The BSGI) moderates global grain prices, whether it ends up in a specific country or not, its availability in the world market reduces wheat prices, it reduces other commodity prices,” Mr. Meyer said. “The BSGI is critical for Ukrainian exports but it isn’t without challenges for the Ukrainians. We’ve already seen them pull back on winter wheat planting. The BSGI doesn’t get them back to pre-war levels of exportability. Production during war and any number of problems also are likely to reduce their spring crop plantings along with their already-lower winter wheat plantings. My concern would be if the initiative is now renewed, they will have to rationalize production down. It’s serving a very important purpose to moderate global grain prices.”