Russia’s invasion of Ukraine means “big, huge” price swings in the wheat futures market, and that volatility will continue, an economist says. 

“Just yesterday and today we’ve taken almost $2 out of the nearby futures, and earlier in the week, we’d added $2,” said Randy Fortenbery, economics professor and Thomas B. Mick Small Grains Endowed Chair at Washington State University. “Unless there’s some kind of resolution to the conflict or some negotiated peace, we will continue to see significant volatility.”

That’s to be expected, given the uncertainty over the scope of the conflict and what it might mean in the next few months, heading into the 2022 harvest, he said on March 9.

“It’s hard to say what to expect, because when you enter a market of complete uncertainty, nobody really knows the duration of the conflict nor exactly where prices should settle out, because we don’t know when it might be resolved and what the overall outcome might be,” Fortenbery said.

The cash market has been more subdued than the futures market, Fortenbery said.

“We got a bit of a bump for those of us in the Pacific Northwest, but we’ve given probably half of that back here in the last couple days as futures have come down,” he said. 

Ukraine’s government has banned the export of wheat, oats, millet, buckwheat, sugar, live cattle, and meat and other “byproducts” from cattle.

That will have more impact on next year’s wheat harvest, Fortenbery said. 

“Certainly the conflict should continue to support prices — there may not be as much downside risk as I thought there was two or three months ago,” he said. “But we haven’t really seen the cash market explode, so that’s hard to say.”

Farmers already had very high input costs, and the Russia-Ukraine conflict will push them even higher.

“Even with high wheat prices, it necessarily doesn’t translate to significant increase in profitability because input costs are going to be quite high,” Fortenbery said. 

Fortenbery’s been watching the USDA’s World Agricultural Supply and Demand Estimates report, which tried to take the impact of the conflict into account, he said.

The report calls for “lower supplies, unchanged domestic use, reduced exports, and higher ending stocks” for wheat in the U.S.

World wheat exports are down 3.6 million metric tons to 203.1 million metric tons, as decreases for Ukraine and Russia are only partly offset by increases for Australia and India, according to the report.

Imports are decreased for many countries, including Turkey, Egypt, the EU, Afghanistan, Algeria, Kenya, Pakistan, Tanzania and Yemen, based on reduced Black Sea wheat export availability and higher world prices, according to the report.

Fortenbery will watch U.S. spring planting reports in the next few weeks, particularly corn and soybean acres in the Midwest and spring wheat acreage.

Likely the only thing that would provide certainty would be resolution of the conflict, Fortenbery said.

“That does not seem to be on the table right now,” he said. “I think it’s pretty clear that even though Russia probably underestimated the challenges they would face invading Ukraine, they’re not about to back off, at least yet.”