Wheat farmers concerned about ‘staying in business,’ NAWG president says

National Association of Wheat Growers President Nicole Berg joins Yahoo Finance Live to discuss soaring wheat prices amid escalations in the Russia-Ukraine conflict, crunches on wheat supplies and farming equipment, and crop insurance offsetting risks for American farmers.

Video Transcript

- Welcome back to Yahoo Finance Live, everyone. Almost a month into the Russia-Ukraine conflict without much progress on compromise. Over the weekend, the Ukrainian government rejected Russia's deadline to lay down weapons in Mariupol. And security cameras caught a Russian attack on a shopping center in Kyiv leaving eight dead.

Mayor of Kyiv and former professional boxer Vitali Klitschko joined Yahoo to discuss what's happening on the ground in Ukraine. In a passionate message, he shared his thoughts on Putin and what he thinks it will take to end the war. Here's what he had to say.

VITALI KLITSCHKO: Putin is aggressor. Putin is dictator. Putin want to make from Ukraine slaves.

No reason to talk to him. He's sick.

This war can touch anyone in the European continent. It can touch everyone in the world. Everybody have to unite our power, unite our energy and our vision to stop the war. It's unity is a key for freedom.

- And this conflict in Russia-Ukraine obviously having a rippling effect. We're seeing that the US Department of Agriculture shows that Russia and Ukraine account for nearly a third of the world's wheat, and that's been sending prices up over 78% this year. But are US farmers actually reaping any benefits?

Well, not necessarily, according to the data. Nicole Berg, National Association of Wheat Growers President, joins me now to break this down. Thank you for joining us today, Nicole. Now, with this sudden uptick in Wheat prices and futures shooting higher, how are you seeing this shift making its way through this chain of grain handling from the local farm cooperatives, to the flour millers and the exporters?

NICOLE BERG: Well, first, thank you for having me. And it's definitely a roller-coaster ride out there right now. Wheat prices go up, wheat prices go down. And then now we're have extreme inputs-- fertilizer, fuel, all double, triple. So it's quite uncertainty across the countryside right now.

- --far in advance-- given how far in advance some of these crop purchases are made, and as you mentioned, things like paying for seed, for fertilizer-- to what degree are US farmers able to capitalize on these higher prices at the moment?

NICOLE BERG: Well, at the moment, some folks are talking about hedge to arrive as well as trying to secure their input costs to a certain level. So the hedge to arrive means you can set your price now, but you have to deliver. If you don't deliver your wheat, you might have to pay the money back. So there's a lot of risk in farming out on the countryside and then back to that word-- uncertainty.

- So for the farmers that you've been speaking to over the course of this conflict, what are their biggest concerns right now?

NICOLE BERG: I think our biggest concerns right now is staying in business with these input costs. We haven't necessarily had great prices in the past. We've had drought here in the United States. And so farmers across the countryside, we're pinching pennies to stay in business. But we are enjoying the higher prices in wheat. But the wheat prices aren't quite high enough to cover our bottom line.

- So then how do you US grain growers and processors, how do they usually insure themselves against some of these volatile price swings? And how is that working in this current situation?

NICOLE BERG: One tool in our toolbox with regard to risk is we have crop insurance, especially during a fluctuation in revenue. So there's more revenue coverage we can take. It's just like covering your car when you get in a car accident. Our wheat crops sometimes get into a wheat accident, and then we have crop insurance as a safety net to cover our costs.

They don't necessarily cover all the costs. But what they will do is maybe keep us in business for the next year and keeps the bankers happy.

- And as you're mentioning, the prices haven't always been that great. So then talk about the other key inputs and the factors that do affect the livelihoods of wheat farmers outside of the conflict and preceding it.

NICOLE BERG: So some of the big key inputs we have is fuel, fertilizer, crop protection products, also equipment. Equipment is very difficult as well as just getting parts in to make sure our combines are running. Last year, I know of a farmer who had to wait three weeks during harvest just to get a part so he could finish harvest.

So there is definitely, can we get the equipment? Can we stay in business? And can we get our next crop harvested are all, obviously, always in question. But I have a feeling farmers are resilient across the US and we'll make it another year.

- And as we just get a check on where prices, where, we look at whether the price of May wheat was on the Chicago Board of Trade-- that shot up 54% from right before the invasion on February 23 third to $13.63 per bushel on March. 8 the price has dialed back somewhat, but still elevated-- and we still don't have a sense of just how long this conflict will last. How are farmers preparing for this ongoing volatility between now and, say, planting and harvest time?

NICOLE BERG: A lot of us now-- a lot of the wheat crop is planted. 70% of the wheat across the US is already planted. So some of our inputs were already inputted and we did a lot of pre-fertilizing in the fall. And so that's going to help with the bottom line of wheat growers across the US.

But we hope that the prices keep going up just to catch up with our inputs. If they don't catch up, I'm not sure what we're going to do. But some folks may have to refinance their farms. Some folks may have to go to their banks and ask for a larger line of credit. I can't be certain or sure, but we hope that drought in certain areas, like in the Midwest right now-- Oklahoma seeing extreme drought-- so it's just uncertain across the countryside and in rural America.

- So then when you add all those headwinds and pressures together, then, where do you see wheat prices and demand, perhaps, going? And what might that mean for overall food prices with these disruptions?

NICOLE BERG: I definitely see food costs going up. I do grow other crops other than wheat. But yeah, always have to remember food prices are always a year behind. So we're working on last year's crop that's in the markets now. And so now we have higher input costs, higher prices, and then we're going into this year's crop.

And so definitely see the prices going up. But when you have a third of the world's wheat production in question, I definitely see just a roller-coaster. I cannot predict if Russia-Ukraine can even harvest their crop. But only time will tell.

- We do appreciate your input today. Thank you so much. Nicole Berg from the National Association of Wheat Growers President-- thank you so much.