*This is the eighth article in our 2025 Southwest Economic Outlook series. Oklahoma State University and OSU Extension Service, and Texas A&M University and TAMU AgriLife Extension Service economists weigh in on the 2025 outlook. A digital copy of the Economic Outlook Issue is also available online.
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As decisions were being formed for the 2024 wheat crop, in the summer of 2023, there was an underpinning of enthusiasm. Markets had shown strength. Futures prices were in the high 7s and 8s – insert your typical basis to make that price your very own. Global stocks had been shrinking, albeit U.S. stocks were inching higher. During all of this, the overall farm economy improved. An emerging El Nino weather pattern was on the horizon, boding well for above-normal precipitation for the Southern Plains that winter.
This enthusiasm was dampened as planting began in earnest. Market prices slipped lower by about 10% from late July to late September. Then, as the fall turned to winter and winter to spring, pressures began mounting. Favorable crop conditions were being reported and global markets led to further price declines, from about $7.10/bushel for the July KC Hard Red Winter Wheat futures contract in late September to a low of $5.43/bushel on March 6, 2024, a 24% drop.
Drought impact
With spring and the 2024 harvest coming into view, market conditions improved as crop conditions across the U.S. winter wheat crop started slipping into poor and very poor ratings. A run of dry weather hit the Southern Plains and Southern Russia. This, combined with a late-spring drop in temperatures in both key production areas at a critical point in the growing season. July HRW futures prices jumped 30%, up to $7.33/bushel on May 28, 2024. The market response was short-lived, and prices tumbled back to the mid $6.00 range as harvest started and fell further below $6.00/bushel late in June and early July – a drop of 22% over this time frame. Yields and overall production were better than anticipated during late winter, and in early spring, poor condition sentiment and pressure were added due to falling corn and soybean prices.
The 2024 U.S. winter wheat crop did shake the prior two-year high non-harvest rates: 70% of 2022’s planted acres were harvested and 67% of 2023’s planted acres. U.S. harvested acres for 2024 are currently estimated at 26.103 million, or 78% of planted acres, which is more typical and on par with the prior 10-year average (82%). Oklahoma and Texas fell in line with the U.S. Oklahoma’s and Texas’ estimated harvest rates were higher than the past two years at 65% and 47%, respectively, of planted acres and in line with prior year norms.
Dampened market conditions
The late summer and fall of 2024 preparation for the 2025 crop, have not shared the same enthusiasm we saw in the summer of 2023. The dampened market conditions continued – as summer crops experienced ideal growing conditions outside of the Southwest – and drought crept into the Southern Plains states and parts of the lower Western Corn Belt. Some producers planted into rather parched soil while others paused. Planting progress stayed behind pace until rains fell in mid-October, at which point planting was in high gear and the crop has since come much closer to previous year benchmarks for planting and crop emergence.
Looking ahead to the 2025 crop, there is a divergence of wheat fundamentals globally versus domestically. Global supplies have declined in the last few years. The global stocks-versus-use ratio is currently pegged at 32.1% for the 2024/25 crop compared to 33.4% in 2023/24 and 34.7% in 2022/23. However, U.S. wheat stocks in elevators and on-farm storage are up year-over-year. This is especially true in the Southern Plains. One of the key factors of basis is local supply and demand. This increased local supply is likely a culprit of the weaker-than-normal basis across the Southwest growing region.
Trade and exports
Trade and wheat exports are another consideration as the 2024/25 growing season moves along. As of this writing, all wheat export sales are 32% above year-ago levels. This increase is in the face of headwinds from a stronger U.S. dollar, which makes our goods more expensive to our trade partners. With many headlines focusing on how the new administration will handle trade in the years ahead, some of these export commitments may be an effort to get in front of possible increased tariffs. Still, as global supplies show signs of tightening, the other reason could be a higher need for wheat from U.S. sellers.
A final aspect to keep an eye on is the strong market conditions for cattle. With this in mind, 2025 winter wheat harvest rates and yields may suffer as winter grazers find that incentive too strong to ignore.
In conclusion, there is little doubt that the current wheat market environment is bleak, and this carries over into most grains and oilseeds. Expectations are in place for a drop in farm economic conditions. So, it is critical to control those things that are controllable, and farm management becomes more critical than ever.