Understanding the price of wheat is not as simple as driving to the local elevator to see the posted prices or checking bids on a website. Understanding the complexity of factors that go into setting that price includes analyzing supply and demand, logistical costs, geopolitical influences and other macro- and micro-economic factors. Kansas Wheat CEO Justin Gilpin sat down with Aaron Harries, Kansas Wheat vice president of research and operations, to break down the 2023 wheat harvest and provide his perspective on domestic demand and global trade issues influencing the wheat world in the latest episode of the organization’s “Wheat’s on your Mind” podcast.

“Every year is a little bit different, but 2023 is probably going to be one of those years that does stand out for a long time on charts, and not just due to the overall challenges this crop faced,” Gilpin said. “Combined with the market volatility and unprecedented geopolitical events — everything that is occurring simultaneously within the wheat market right now is pretty incredible.”

The pair started by walking through the 2023 Kansas wheat harvest, which USDA’s National Agricultural Statistics Service currently estimates will be the smallest since 1966 at 208 million bushels on 6.5 million acres.

Gilpin referenced how that harvest number has shifted over the last two months, referencing a prior episode of the podcast with Dave Green, executive vice president at the Wheat Quality Council. The podcast followed the organization’s annual Hard Winter Wheat Tour in May 2023, during which participants calculated crop estimates from 652 wheat fields from Manhattan to Colby to Wichita.

The tour’s official yield estimate was 30 bushels per acre — right on target with USDA’s current projections — but the projection for total wheat production was 178 bushels. In comparison, USDA NASS predicted in its May 1 report that the Kansas crop would come in at 191 million bushels with average yields of 29 bushels per acre and abandonment at 18.5 percent.

“That low prediction was a surprise,” Gilpin recalled. “We knew it was a bad crop, but we didn’t know it was that bad.”

In the weeks immediately following the tour, however, rain started coming. Some producers received as much moisture in a four-week period than they had received in the previous 12 to 18 months.

“The rain started to change the tune a little bit,” Gilpin said. “Farmers started feeling a little better when it started replenishing some moisture. Some of that later-planted or later-maturing wheat benefitted from the rains and so the yield prospects from some of those areas started to improve.”

The rains did help fill heads, making a better-than-expected crop for many. USDA NASS currently estimates average yields at 32 bushels per acre compared to 19.5 bushels per acre in 1966, a gain directly attributable to improvement in available wheat genetics, recommended farming practices and decades of on-farm knowledge. Test weights also started strong with heavy heads at 62 pounds per bushel.

“Kansas farmers are proud of the Kansas Wheat Innovation Center that they’ve invested in and the strides that we’ve made in the past decade to address the challenges that farmers are facing — whether it’s through double haploid production or identifying heat and drought tolerance,” Gilpin said. “It’s an important investment that farmers are making. It’s harder to see dividends from those investments in years like this, but I like to think that those strides have kept this from being a bigger disaster than it could have been.”

There’s no question that drought took a heavy toll with higher-than-average abandonment across the state. Rain also brought its own challenges, mainly in the form of increasing weed pressure and continual harvest delays. As a result, test weights dropped from their early highs as harvest progressed and more fields were abandoned, some due to weeds. All that means the final numbers for the 2023 Kansas wheat crop are likely to continue to drop. USDA-NASS will put out an updated estimate on the Kansas wheat crop in August, but the final count for the Kansas wheat crop will not come until the agency’s Small Grains Annual Summary on September 30.

“Whether it’s been the hailstorms or the weed pressure, with all the challenges we’ve had trying to get this crop out of the field for Kansas, it wouldn’t surprise me to see that number come down a bit,” Gilpin said.

The good news is that while the crop did not make the bushels, it did have high protein. Protein and yield are usually inversely proportional — so lower-yielding crops have higher protein and vice versa. The central corridor in Kansas reported proteins averaging 13 or 14 percent, while the western third of the state had more variability from 10 to 14 percent. That’s good news for millers and bakers who utilize hard red winter (HRW) wheat for products like bread or tortillas that require that strength.

“The early comments we’re hearing from industry is that the wheat is performing adequately, similar to last year,” Gilpin said.

But while the combines are finally finishing rolling in Kansas, the value of that protein won’t be fully defined until the spring wheat harvest is complete in the northern Great Plains. Hard red spring wheat is generally a high-protein crop, so if the crop in those states is more successful than in Kansas, the market may not reward producers or elevators with premiums for protein. In fact, it’s equally as likely some buyers will seek out lower-protein wheat to offset some of the higher-protein wheat.

In addition, producers further east grew an almost record soft red winter (SRW) wheat crop in the Mississippi and Ohio river valleys. There is currently a $1.50 to $2.00 per bushel difference between HRW and SRW wheat — primarily because soft wheat doesn’t have the bread-making capability of hard wheat. Despite the milling and baking differences, a large supply of SRW wheat is tempting when the HRW crop suffers.

“Buyers are going to be able to buy what they want, but it’s certainly going to be an interesting year,” Gilpin said. “You are going to see some millers and bakers that are trying to offset some of the costs that they’re seeing. That includes trying to blend in some soft wheat when the hard red winter wheat crop is going to be the smallest in years.”

All these supplies factor into the overall stocks-to-use ratio, which is used to estimate how much wheat is available globally to meet the needs of consumers around the world. While overall wheat supplies are tighter than anyone in the supply chain would prefer, stocks-to-use ratios remain above the concerning levels from 2007/2008. Geopolitically, however, the enduring tensions between Russia and Ukraine will continue to have a direct impact on the availability of world wheat stocks as well as from where the world buyers can source those stocks.

“The Black Sea does create some uncertainties that do start to question some of that availability of the stocks-to-use ratio because of an availability issue out of that region,” Gilpin said. “There’s been a strategic intent of Russia attacking grain terminals and then explicitly saying that even without Ukrainian wheat exports, Russia can be that supplier and replace them.”

“One out of every five vessels is going to be delivering food around the world from Russia. When they have that control, they are following it up with their intention of trying to leverage influence in friendly countries and governments. It’s a very unnerving place that world trade is entering right now.”

All these influences on the price of wheat bear watching as producers shift their focus from a frustrating and challenging 2023 wheat harvest to putting the 2024 crop into the ground. Gilpin said Kansas Wheat is continuing to look even further down the road to forecast what the world of wheat will look like and how to position Kansas wheat farmers in that economic landscape.

“We’re going to need prices to stay favorable and we’re going to need Mother Nature to cooperate,” Gilpin said. “And we must start thinking longer term, not just where we’re going to be a year from now. What do we have to be doing to put in place all the things across the whole value chain in the wheat industry to make sure that we’re protecting our national interest in having a productive and successful wheat crop from farmer to baker to consumer.”

Learn more about Gilpin’s perspectives on this year’s harvest, supply-and-demand factors across wheat classes, end-use quality, international market influences and more in the latest episode of the “Wheat’s On Your Mind” podcast at wheatsonyourmind.com.