DENVER, COLORADO, US — Continuing effects from the pandemic and war in Ukraine have kept agricultural supply chains mired in dysfunction, according to a new quarterly report by CoBank’s Knowledge Exchange.

“Warehouse and inventory costs are still rising at near-peak levels, and transportation costs are rising at a much higher rate than pre-pandemic,” said Dan Kowalski, vice president of CoBank’s Knowledge Exchange. “Grain rail car availability and prices were at multi-year lows and highs, respectively, in the second quarter. Although as consumer purchases of goods continues to soften, supply chains will slowly recover.”

While agricultural and energy commodity supplies remain tight, shifts in speculative sentiment have brought prices down from their peaks. For agriculture, replenishing grain and oilseed supplies globally will require two growing seasons. And there is no relief in sight for natural gas supplies, ensuring power prices will remain high as well, according to the report.

Grain prices remained volatile in the second quarter as markets continually reassessed a range of factors, including the war in Ukraine, a smaller Brazilian soybean crop and ongoing dry conditions in the United States. Wheat prices fell below $9 per bushel as investors reduced their commodity exposure amid a rapidly cooling global economy. Grain and oilseed prices should experience upside pressure in the near term, due in part to tight global supplies of wheat and soybeans in particular, CoBank said.

The US ethanol industry saw a strong second quarter, with few signs of demand destruction despite a spike in retail gasoline prices and rising inflation.

Operating margins remained favorable at $0.33 per gallon, well above the five-year average of $0.22 per gallon. Ethanol exports hit a four-year high of 185 million gallons in April, resulting in year-to-date growth of 67% through the first four months of 2022.

Inflation is now the key risk to meat and poultry consumption, as the impact of COVID-19 on consumer food spending is diminishing, the report noted. Retail meat and poultry prices were 18% higher in May compared to 2021 and both spot market supplies and freezer inventories are below pre-pandemic levels. The combination of tight supplies and steady demand kept meat prices 20% higher than the five-year average for the March-May period, CoBank said.

Declining cattle supplies are expected to converge with excess processing capacity over the next 12 to 18 months, which should contribute to more favorable conditions for producers.

After several years of successful growth, US pork exports are contracting in 2022 driven primarily by a reduction of exports to China. The volume of US pork exports to China has fallen from over 160 million pounds per month in 2021 to about 40 million pounds per month in 2022, according to the report.

US rice prices marked a new record high in the first quarter of 2022, up 43% year-over-year, with the momentum carrying over into the second quarter. April rice imports were the second highest on record for the month, with combined imports year-to-date more than double the average pace over the past decade. With US all-rice acreage falling once again per the June Acreage Report and USDA projecting higher rice production globally in 2022, another year of strong rice imports is ahead, CoBank said.