Jump in dark northern spring wheat prices takes soft white wheat with it
Farmers should take advantage of the surge in wheat prices and sell at least some of their crops, market analysts say.
On the Portland market, dark northern spring wheat prices have ranged from $8.55 to $10.15 per bushel, depending on protein percentages. That’s an increase of more that $2 a bushel from April prices, according to the USDA Market News.
The increase is the result of dry weather and extreme heat in the wheat-growing regions of eastern Montana and the Dakotas, said Byron Behne, marketing manager for Northwest Grain Growers in Walla Walla, Wash.
The Wall Street Journal recently listed wheat as the top-performing commodity, up about 25 percent year-to-date.
“I don’t think we’re going back to $25 (per bushel) DNS like we did in the winter of 2008 ... but $10 isn’t out of the question because it’s a very specific high-end wheat with a high-end use,” Behne said. “People are going to pay whatever it takes to get it.”
Dark northern wheat generally has a high percentage of protein — more than 14 percent — and soft white wheat has a lower percentage of protein, usually below 10.5 percent. Higher protein generally indicates higher gluten content. High gluten content is important for baking light, yeast-leavened breads.
Nearby DNS futures prices are higher than futures prices later on, said Clark Johnston, a marketing consultant in Ogden, Utah.
“That’s because the demand is outrunning the supply,” he said. “The market is saying, ‘We need your wheat right now, we’re not going to give you an incentive to hold it until after the first of the year.’”
The DNS price increase prompted speculators to move into the other wheat classes, said Dan Steiner, grain merchandiser for Morrow County Grain Growers in Boardman, Ore.
Soft white wheat ranged from $5.50 to $5.60 per bushel in Portland this wheat. That’s up from $4.40 to $4.60 a bushel in April. Hard red winter wheat ranged from $5.51 to $6.20 per bushel, up from $4.97 to $5.17 a bushel in April.
“For soft white, six months ago, you’d have thought, ‘This would be a great price,’” Steiner said. “But when you’re looking at $9 wheat (for DNS), it’s like, ‘Gee, can we have some more of that?’”
“They’re just buying ... all wheats now, which probably isn’t really sustainable in Chicago futures because soft wheat and dark northern spring wheat are two completely different things,” Behne said.
Lower protein soft white wheat has less gluten that DNS and is used in Asian noodles, cakes, pastries and flat breads.
“I don’t really see this ending well for soft wheat unless we end up with a corn problem later on,” Behne said.
Corn prices would need to increase to pull excess soft wheat supplies into livestock feed channels and boost demand, Behne said. Wheat futures were nearly $2 over corn futures, making the spread too high for farmers to buy it for livestock.
“We have a big soft white crop coming again this year,” Behne said. “Without some feeding going on, I don’t know how we’re going to chew through that.”
Wheat needs to trade at roughly $4.95 per bushel to be viable for feed, Steiner said.
Steiner isn’t sure how long the higher prices will last.
“I had no idea this rally was going to be this big, that it was going to go this far, or how long they’re going to push this,” he said.
Behne and Johnston both expect an eventual drop in prices. But weather forecasts indicate heat will continue in the spring wheat production areas of the Northern Plains, Behne said.
Johnston advises farmers to look for futures bids that are in keeping with current cash prices, and contract their wheat now before prices begin to decline, particularly in the other classes.
If DNS gets to be too expensive, some end-users won’t want it, he said, which will impact cash markets.
“There’s been a 90-cent spread between the high and the low of the day,” he said. “When that kind of stuff happens, I start to get a little nervous about this market.”
In recent tenders, Russia sold wheat to Egypt at $5.80 per bushel and Romania at $5.75 per bushel. France offered wheat at $6.10 per bushel, while U.S. wheat prices were $8.03 per bushel, Steiner said.
“We’re not remotely close to being competitive on the world market,” he said. “(Prices are) spectacular, but probably a selling opportunity (for farmers), I would guess.”